Returns to acquirers of privatizing financial services firms: An international examination |
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| Affiliation: | 1. Faculty of Economics and Business, Department of Economics, Econometrics and Finance, University of Groningen, P.O. Box 800, Groningen 9700 AV, The Netherlands;2. Department of Economics and Finance, University of Wyoming, 1000 East University Ave., Laramie, WY 82071, USA;3. Centre for Applied Macroeconomic Analysis (CAMA), The Australian National University, Canberra, ACT 2601, Australia;1. School of Business, Management and Economics, University of Sussex, Falmer, East Sussex BN1 9QH, UK;2. Department of Finance, School of Business and Economics, Maastricht University, Tongersestraat 53, 6211 LM Maastricht, The Netherlands;3. Finance Department, Vrije Universiteit Amsterdam and Tinbergen Institute, De Boelelaan 1105, NL-1081 HV Amsterdam, The Netherlands |
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| Abstract: | While the literature reports improved performance for privatizing firms, banking markets are different. Many privatizing financial services firms face unique problems such as an overhang of problem loans and weak credit cultures and legal systems. We investigate the returns to successful bidders in privatization acquisitions of financial services firms, examine short-horizon performance, and test whether such acquisitions result in a change in risk for the bidding firm. Our results show that the cumulative abnormal returns to shareholders of bidding firms are positive, perhaps reflecting initial optimism that the foreign firm acquiring the privatizing firm would share in the success associated with privatization. Bidders also experience an increase in their total risk following the acquisition. |
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