Comparison of Merger Impact on the Profitability Measures of EU Domestic & Cross Border Bank Acquirers
13 Pages Posted: 18 Jun 2010
Date Written: June 18, 2010
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
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