M&AS performance in the European financial industry

Jose Campa and Ignacio Hernando

No D/588, IESE Research Papers from IESE Business School

Abstract: This paper looks at the performance record of M&As that took place in the European Union financial industry in the period 1998-2002. First, the paper reports evidence on shareholder returns from mergers. Merger announcements brought positive excess returns to the shareholders of the target company around the date of the announcement, with a slight positive excess return in the 3-month period prior to announcement. Returns to shareholders of the acquiring firms were essentially zero around announcement. One year after the announcement, excess returns were not significantly different from zero for either targets or acquirers. The paper also provides evidence on changes in operating performance for the subsample of mergers involving banks. M&As usually involved targets with lower-than-average operating performance for their sector. The transactions resulted in significant improvements in the target banks' performance, beginning on average two years after the transaction was completed. Return on equity of the target companies increased by an average of 7%, and the same firms also experienced efficiency improvements.

Keywords: mergers and acquisitions; financial industry (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-04-10
New Economics Papers: this item is included in nep-bec, nep-eec and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: M&As performance in the European financial industry (2006)
Working Paper: M&As performance in the European financial industry (2005)
Working Paper: M&As Performance in the European Financial Industry (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0588

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