Empirical Study of post-takeover performance in banking industry: comparison between U.S. and European bank acquisitions.
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Takeover is a business activity which really started in the beginning of the eighties and which still takes a strong part in the business and financial area all over the world. According to our studies as the desire for further acknowledgements and the desire of building a career around financial activities, this study has been naturally conducted in the banking area.
Regarding the steady use of acquisition like a powerful process with some positive and negative sides, we decided to implement a comparison of different mergers and acquisitions in the banking industry in the United States and Europe. This comparison has been supported and based on the third main topic of our study: performance.
These large and complex subjects combined together lead to the following hypotheses:
Hypothesis 1: Performance is not improved after takeover in the banking industry.
Hypothesis 2: The level of post takeover performance is the same in the U.S. as in the European bank acquisitions.
Based on the historical data and knowledge, the United States was the pioneer in the development of such gathers in the banking sector. Considering the United States as a reference, a first purpose was to compare them with the bank mergers and acquisitions in Europe. Stating on some possible differences as increasing our own knowledge have been some others purposes which have supported our work.
A first large part of our work was focused, through a large literature review, on the enhancement of our knowledge as the statements of the basis and support for the analysis.
To illustrate and to try to answer our research question, we have conducted our study based on a sample of 20 acquisitions which were achieved in the banking industry between March 1998 and May 2004. 10 of these acquisitions had been achieved in the United States as the 10 remaining acquisitions had been executed in Europe.
The analysis has been achieved by collecting data in Thomson Datastream Advance.
Based on a quantitative method, we applied two financial models: The Market Model (MM) and the Market-Adjusted Returns Model (MAR) supported by the Cumulative Abnormal Returns Method (CARs).
The post-takeover study has been delimited on a period of 42 months after the public announcement.
The study and the comparison between the United States and Europe have shown some differences between the two areas. Nevertheless it seems that negative abnormal returns are usually the case after such takeovers on the whole period studied. Some positive abnormal returns have been recorded at different points in the time into the studying period.
According to the models we applied, the US banks results seem to be better than the ones of European banks: the differences range from 5,58 to 16,65 points under the MM, and from 1,66 to 18,08 points under the MAR model.
Place, publisher, year, edition, pages
Umeå: Handelshögskolan vid Umeå universitet , 2008. , 71 p.
Abnormal returns, Acquisition, Cumulative Abnormal Return method, Market Model, Market-Adjusted Returns Model, Banking industry, Post-takeover performance
IdentifiersURN: urn:nbn:se:umu:diva-1704OAI: oai:DiVA.org:umu-1704DiVA: diva2:141860
Nilsson, Per, Assistant Professor
Gällstedt, Margareta, Director of Studies