Journal of Finance and Bank Management

Do domestic banks Mergers and Acquisitions Still Create Value? Recent Evidence from Europe
George Kyriazopoulos, Evangelos Drymbetas

Abstract
We study the M&A phenomenon in Europe during an extensive period spanning 1996-2010 using a sample of 118 domestic bank Ms&As. We compare the short-term impact of acquirer and target share prices around the announcement period and find significant abnormal returns for target banks for the 3-day event window. We argue that prior profitability can explain short-term price effects for both acquirers and targets since ROA affects positively cumulative abnormal returns when employing cross-sectional regression analysis. Accordingly, bidder banks, displaying prior low return on equity, experience losses in the post-event 10-day period, while target banks losses expand throughout our 21-day event window, underlying the important role of ROE on the formation of investment decisions and overall market perception. Investors favour both acquirers and sellers with high prior profitability.

Full Text: PDF     DOI: 10.15640/jfbm.v3n1a10