M&A Operations and Performance in Banking |
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Authors: | Elena Beccalli Pascal Frantz |
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Institution: | 1. Università degli Studi di Macerata, Macerata, Italy 2. Department of Accounting, London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, UK
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Abstract: | This paper investigates whether M&A operations influence the performance of banks. Using a sample of 714 deals involving EU acquirers and targets located throughout the world over the period 1991–2005, we investigate whether M&A operations are associated with improved performance (using both standard accounting ratios and cost and alternative profit X-efficiency measures). Despite the extensive and ongoing consolidation process in the banking industry, we find that M&A operations are associated with a slight deterioration in return on equity, cash flow return and profit efficiency and with a marked improvement in cost efficiency. Hence, the improvements in cost efficiency appear to be transferred to bank clients. These changes in performance are directly attributable to the M&A operations, and would not have occurred in their absence. Moreover, these changes exhibit a particularly negative trend for cross-border deals to testify the importance of geographical relatedness in order to achieve better post-M&A performance. The environmental and bank-characteristics that make a deal successful or unsuccessful are finally identified. |
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