Measuring Value Creation in Bank Mergers and Acquisitions

Abstract

This paper performs an event study on mergers and acquisitions between publicly listed Italian banks. Our study shows that previous literature may have only partially captured the market reaction by choosing the announcement date as the event date. In less efficient markets that date is not sufficiently accurate to capture all the market reaction because of the leakage of information. Using the rumours date instead, we find that in our sample the overall market value creation can even become from negative to positive. Moreover, we also find evidence that in Italy private benefits are more likely to drive the bidders' decisions rather than value creation goals.

Keywords: mergers and acquisitions, banking sector, event study, market value creation, rumours

JEL Classification: G14, G21, G34