Diversification versus specialization: an event study of M&As in the European banking industry

This study examines the stock market valuation in terms of expected gains of mergers and acquisitions (M&As) amongst banks that were announced from 1991 to 2001 in 13 European markets. M&As are classified according to activity, geographic specialization or diversification. A bivariate GARCH...

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Bibliographic Details
Published in:Applied financial economics 2004-06, Vol.14 (9), p.663-669
Main Authors: Lepetit, Laetitia, Patry, Stéphanie, Rous, Philippe
Format: Article
Language:English
Subjects:
Abnormal returns
Bank acquisitions & mergers
Diversification
Economics and Finance
Humanities and Social Sciences
Securities markets
Specialization
Stochastic models
Studies
Valuation
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Summary:This study examines the stock market valuation in terms of expected gains of mergers and acquisitions (M&As) amongst banks that were announced from 1991 to 2001 in 13 European markets. M&As are classified according to activity, geographic specialization or diversification. A bivariate GARCH model is used to estimate abnormal returns taking beta conditional variability into account. The results document that there is, on average, a positive and significant increase in value for the group of targets' banks. Moreover, it is found that on average there is a positive and significant market reaction for the two types of transactions: cross-product diversification and geographic specialization.
ISSN:0960-3107
1466-4305
DOI:10.1080/0960310042000233430