Determinants of M&A success in the European insurance industry: New evidence from a stochastic dominance perspective

• Published in: Zeitschrift für die gesamte Versicherungs-Wissenschaft 2016-10, Vol.105 (4), p.391-420
• Main Authors: Altuntas, Muhammed, Bach, Sven, Rauch, Jannes
• Format: Article
• Language: English
• Subjects: Abhandlung; Commercial Law; Economics and Finance; Finance; Investments and Securities; Macroeconomics/Monetary Economics//Financial Economics; Public Health
• ISSN: 0044-2585; 1865-9748
• DOI: 10.1007/s12297-016-0348-8

This research analyzes the success of mergers and acquisitions (M&A) for European acquiring insurers using a stock market perspective. In contrast to previous papers that use an event study approach, our analysis is based on the stochastic dominance methodology, in which we analyze short and long term capital market reactions following an M&A announcement. In addition, we examine firm- and transaction-specific determinants associated with superior M&A success. Using a sample of 102 European insurance M&A transactions over the period 1993–2009, our results indicate that acquiring insurers are second-order dominated by their benchmark portfolio in the short term. In the long run, we find no evidence of stochastic dominance compared to their non-acquiring counterparts. Moreover, we find that geographically diversifying acquirers are rewarded by the market, and that transactions in which the acquirer and target have a business relationship before the M&A announcement outperform transactions without pre-M&A participation in the short-term. Finally, we detect a positive relationship between cash payment and acquirers’ M&A success.