Determinants of Mergers and Acquisitions: Evidence from the Insurance Industry

50 Pages Posted: 8 Dec 2019

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

María Rubio-Misas

University of Malaga - Finance & Accounting

Date Written: November 20, 2019

Abstract

This paper fills a gap in the existent literature on the determinants associated with the likelihood of being involved in mergers and acquisitions (M&As) by insurance firms. We investigate firm factors for both becoming a target or becoming an acquirer using a detailed database of the Spanish insurance industry over the period 2000-2012. The period encompasses the years of the global wave of M&As in the 2000s and the recent financial crisis. Results indicate that value-enhancing strategies have been the main motivations for M&As, since the increase of performance in terms of scale and allocative efficiency are principal reasons to be involved as acquirers and insurers are more likely to be targets if they are less profitable and have higher premium growth rates. We also find that insurer ownership type matters to be involved in M&As and this finding does not necessarily have to be explained by managerial entrenchment arguments. Results also show variations among different ownership types concerning the influence of the product diversification determinant on the probability to become acquirers.

Keywords: Mergers and Acquisitions; Ownership Type; Performance; Diversification; Financial Crisis; Insurance Industry

JEL Classification: G22, G34

Suggested Citation

Cummins, J. David and Rubio-Misas, María, Determinants of Mergers and Acquisitions: Evidence from the Insurance Industry (November 20, 2019). Available at SSRN: https://ssrn.com/abstract=3491165 or http://dx.doi.org/10.2139/ssrn.3491165

J. David Cummins

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

María Rubio-Misas (Contact Author)

University of Malaga - Finance & Accounting ( email )

Spain
+34 952131236 (Phone)

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