This study examines the short-term and long-term effects of cross border mergers and acquisitions in the Western European banking industry between January 1999 and December 2010. Using the event study methodology, I explore the stock price reaction of both bidders and targets and then I analyze the determinants of this reaction in a short-time period. I also employ various fundamentals for the acquiring firms in order to assess the operating performance surrounding the year of the deal. My findings provide evidence of significant positive market reaction for targets, while acquirers earn negative or around zero and non-significant abnormal returns. In addition, the regression analysis shows that the announcement value, the announcement premium, the nature of bid, the total assets of the target, the return of assets ratio and the cost-efficiency measure are the main driving forces behind the target’s significant abnormal returns. Finally, I test the long-term performance of the acquiring banks by using accounting, efficiency and performance figures. The results reveal significant changes in total assets, total shareholders’ equity, net income and non-interest expenses subsequent to the transaction.
Keywords: Cross border, mergers, acquisitions, banks, Western Europe
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