Shareholders wealth effects and intra-industry signals from European financial institution consolidation announcements

Nickolaos V. Tsangarakis, Hlias K. Tsirigotakis and Emmanuel Tsiritakis

Applied Financial Economics, 2013, vol. 23, issue 23, 1765-1782

Abstract: This study examines shareholder wealth effects and intra-industry signals of consolidation announcements in the European financial sector over the period 2000 to 2006. Results show that announcements generate strong positive valuation effects for targets that become higher in cross-border and small value deals, and are negatively related to their relative size and prior performance. Evidence of acquirer returns is mixed depending on value size, geographic location and legal status of the deal, while returns of combined entities are mostly positive. Our findings provide preliminary evidence that European consolidation announcements transmit intra-industry signals that may encourage or discourage future takeover deals through the revaluation of other similar European financial institutions that are considered prospective targets 'rival financial institutions'.

Date: 2013
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DOI: 10.1080/09603107.2013.848027

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