The Reaction by Industry Insiders to M&;As in the European Financial Industry |
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Authors: | José Manuel Campa Ignacio Hernando |
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Institution: | 1.IESE Business School,Madrid,Spain;2.Banco de Espa?a,Madrid,Spain |
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Abstract: | This paper looks at the reaction by industry insiders, industry analysts and competing firms, to the announcement of M&As
that took place in the European Union financial industry in the period 1998–2006. Analysts covering firms involved in an M&A
transaction do not significantly alter their recommendation. This is consistent with the hypothesis that the transaction on
average is “fairly priced” and that stock market prices reflect all relevant information on the assets. We also find that
the correlation between excess returns for merging and competing firms is positive and, in some cases, significantly higher
for domestic mergers than for international deals. This is consistent with the idea that domestic deals are more likely to
have a negative impact on industry competition.
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Keywords: | Mergers and acquisitions analysts recommendations rival firms |
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