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Measuring the effects of M&As on Eurozone bank efficiency: an innovative approach on concentration and credibility impacts

Emilios Galariotis, Kyriaki Kosmidou (), Dimitrios Kousenidis, Eirini Lazaridou and Trifon Papapanagiotou
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Emilios Galariotis: Audencia Business School
Kyriaki Kosmidou: Aristotle University of Thessaloniki
Dimitrios Kousenidis: Aristotle University of Thessaloniki
Eirini Lazaridou: Aristotle University of Thessaloniki
Trifon Papapanagiotou: Aristotle University of Thessaloniki

Annals of Operations Research, 2021, vol. 306, issue 1, No 14, 343-368

Abstract: Abstract The present paper examines the Mergers and Acquisitions’ (M&As’) effects on the European banking efficiency levels based on a sample of 43 listed commercial banks in eight countries (Portugal, Italy, Ireland, Greece, Spain, Germany, France and Finland). We applied a Data Envelopment Analysis (DEA) in two groups of countries and conducted a second-stage analysis under two different models adjusted for credit-risk factors. This is the first time that DEA, an effective nonparametric method for evaluating efficiency, has been applied in the exploration of the European banking sector M&As that occurred during a crisis period characterized by uncertainty and inconvenient circumstances that influenced performance. The results imply significant effects of the capital adequacy ratio and non-performing loans on DEA scores, and demonstrate the past effects on their performance. Moreover, the results reveal that M&As negatively affect the efficiency levels in both “strong” and “weak” banking systems, whereas technical efficiency levels are positively affected by the growth perspective of the origin countries, regardless of whether banks are involved in one or more M&As. The M&As’ inability to improve the financial stability of the banking system during the examined crisis period of 2007–2015 led to an examination of the merging banks’ concentration levels, before and after the M&A strategy. The results revealed a positive merger effect, only when a M&A takes place under specific levels of market concentrations (i.e., when competition increases).

Keywords: Data envelopment analysis (DEA); Technical efficiency; Bootstrapping; Herfindahl–Hirschman Index (HHI); Second stage analysis; Mergers and acquisitions; C44; C67; C14; C15; G21; G34 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10479-020-03586-9

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