Value Creation in European Bank M&As

40 Pages Posted: 31 Aug 2019 Last revised: 3 Feb 2023

See all articles by Alexandros Kontonikas

Alexandros Kontonikas

University of Essex

George N. Leledakis

Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Emmanouil G. Pyrgiotakis

University of Essex - Essex Business School

Nickolaos G. Travlos

ALBA Graduate Business School; University of Surrey

Date Written: October 1, 2022

Abstract

This paper analyses the value creation of European bank M&As in 1998-2016. After 2008, the European banking market experienced structural changes, in the form of increased market concentration and decreased competition. We show that during this period, bidding banks’ shareholders gained approximately $34 million around the announcement day, a $56 million improvement compared to the pre-2009 era. Importantly, the higher abnormal returns are accompanied with significant improvements in long-term profitability. We find that both announcement abnormal returns and long-term profitability are higher when bidding banks expand in more concentrated and less competitive markets. Finally, we show that the main source of this improved performance is linked to market power exploitation, as captured by the merger-related changes in the net interest margins. Our empirical findings can contribute to the ongoing policy debate regarding the implications of market structure for the banks’ profitability and the depositors’ welfare.

Keywords: Bank mergers and acquisitions; market concentration; competition; event study; long-term merger performance

JEL Classification: G14; G21; G34

Suggested Citation

Kontonikas, Alexandros and Leledakis, George N. and Pyrgiotakis, Emmanouil G. and Travlos, Nickolaos G. and Travlos, Nickolaos G., Value Creation in European Bank M&As (October 1, 2022). Available at SSRN: https://ssrn.com/abstract=3443171 or http://dx.doi.org/10.2139/ssrn.3443171

Alexandros Kontonikas

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

George N. Leledakis

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Str.
Athens, 104 34
Greece
+30 210 8203 459 (Phone)
+30 210 8228 816 (Fax)

HOME PAGE: http://www.aueb.gr/en/faculty_page/leledakis-georgios

Emmanouil G. Pyrgiotakis (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Nickolaos G. Travlos

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

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