In this study the short-term and long term effects of cross border acquisitions are
examined in the European banking industry. The event study methodology is
performed as well as regression analysis in order to assess the stock price reaction of
both targets and acquirers for the period 2001 to 2010 and define their determinants.
Moreover, fundamental ratios are used in order to study the operating performance of
the acquirers in the post acquisition period, which is two years. As far as the short
term study is concerned, the findings state that targets are benefited from the event
and show significant abnormal returns while acquirers do not. Furthermore, the
regression analysis confirms that the determinants of abnormal returns are the
intercept and slope of the market model, the return on equity, return on assets, loans to
deposits, loans to assets, the target’s size and the operating margin. The study also
concludes that the bidding firms are negatively affected in the post acquisition period
in terms of profitability and liquidity.
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