Market Pricing of Bank M&As and Efficiency in Europe

Sailesh Tanna, Hodian Urio, Ibrahim Yousef

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

This study investigates the impact of bank mergers and acquisitions (M&As) on bank efficiency and how such efficiencies are expected to influence bank shareholder value upon merger announcements. It employs stochastic frontier analysis and event study methods along with regression analysis to account for the influences of pre-merger and post-merger efficiencies of bidders and targets in assessing their impact on bidder abnormal returns. Using data for a sample of large commercial bank M&As from 22 European countries, the authors find that bank bidders achieve short-term shareholder value gains from merger announcements and this could be associated with the perceived efficiencies of bidders and targets. More generally, the evidence supports the view that bank profit efficiency has a positive influence on bidder returns from merger announcements, and therefore markets do take into account the importance of efficiency in value creation. This suggests that stock markets price operational efficiency of banks in predicting value gains from European Bank M&As.
Original languageEnglish
Title of host publicationRecent Applications of Financial Risk Modelling and Portfolio Management
EditorsTihana Škrinjarić, Mirjana Čižmešija, Bryan Christiansen
PublisherIGI Global
Chapter5
Pages91-110
Number of pages20
ISBN (Electronic)9781799850847
ISBN (Print)9781799850830, 1799850838, 9781799854111
DOIs
Publication statusPublished - 21 Aug 2020

Keywords

  • Bidders
  • Targets
  • Peers
  • Abnormal Returns
  • Efficiency
  • Event Study
  • Stochastic Frontier Analysis
  • CAR Regressions

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  • Cite this

    Tanna, S., Urio, H., & Yousef, I. (2020). Market Pricing of Bank M&As and Efficiency in Europe. In T. Škrinjarić, M. Čižmešija, & B. Christiansen (Eds.), Recent Applications of Financial Risk Modelling and Portfolio Management (pp. 91-110). IGI Global. https://doi.org/10.4018/978-1-7998-5083-0.ch005