Comparison of Merger Impact on the Profitability Measures of EU Domestic & Cross Border Bank Acquirers

13 Pages Posted: 18 Jun 2010  

Matthias Nnadi

Cranfield University - School of Management

Sailesh K. Tanna

Coventry University

Date Written: June 18, 2010

Abstract

The study compares the M&A effect on the profitability measures of 63 completed EU banks. The cumulative total standardised abnormal return (CTSAR), which is a proxy for M&A and a long window of 60 days, were used to capture the impact and trends in the profitability of both acquirers. The profitability measures were hierarchically regressed against the CTSAR of the cross border and domestic banks acquirers. We found that M&A significantly reduces the profitability of the cross border acquirers but does not have such significant impact on the financial performance of the domestic acquirers. However, increase in the profitability of both acquirers reduces the cost efficiency (CER) of the banks and increases their exposure to risky lending.

Keywords: Mergers, Acquisition, Profitability, Cumulative-Total-Abnormal-Returns, Cross Border, Domestic

JEL Classification: G34, G32

Suggested Citation

Nnadi, Matthias and Tanna, Sailesh K., Comparison of Merger Impact on the Profitability Measures of EU Domestic & Cross Border Bank Acquirers (June 18, 2010). Available at SSRN: https://ssrn.com/abstract=1626804 or http://dx.doi.org/10.2139/ssrn.1626804

Matthias Nnadi (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

Sailesh K. Tanna

Coventry University ( email )

Coventry
United Kingdom

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