Bank Mergers Performance

+Model
JEB-5460; No. of Pages 19
ARTICLE IN PRESS
Journal of Economics and Business xxx (2007) xxxxxx
Mergers and acquisitions and bank performance in Europe: The role of strategic similarities
Yener Altunbas a, , David Marqu s b,1 e
a
University of Wales, Bangor, Centre for Banking and Financial Studies, School of Accounting, Banking and Economics, SBARD, Gwynedd, LL57 2DG Bangor, United Kingdom b European Central Bank, Capital Markets and Financial Structure Division, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany Received 28 January 2005; received in revised form 30 June 2006; accepted 27 February 2007
Abstract We examine the impact of European Union banks strategic similarities on post-merger performance. We nd that, on average, bank mergers have resulted in improved performance. We also nd that for domestic deals, it can be quite costly to integrate institutions which are dissimilar in terms of their loan, earnings, cost, deposit and size strategies. For cross-border mergers, differences between merging partners in their loan and credit risk strategies are conducive to higher performance, whereas diversity in their capital and cost structure has a negative impact from a performance standpoint. 2007 Elsevier Inc. All rights reserved.
JEL classication: G21; G34 Keywords: Banks; M&As; Performance
1. Introduction and motivation At the global level, one of the most notable developments affecting the banking industry over the last 20 years has been the unprecedented level of merger and acquisition (M&A) activity. This trend towards nancial consolidation accelerated in the late 1990s in most OECD countries for
The opinions expressed in this paper are those of the authors only and do not necessarily reect the views or imply any responsibility from the European Central Bank. Corresponding author. Tel.: +44 1248 382191. E-mail addresses: y.altunbas@bangor.ac.uk (Y. Altunbas), david.marques@ecb.int (D. Marqu s). e 1 Tel.: +49 69 13446460; fax: +49 69 13446514. 0148-6195/$ see front matter 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.jeconbus.2007.02.003
Please cite this article in press as: Altunbas, Y., Marqu s, D., Mergers and acquisitions and bank per e formance in Europe: The role of strategic similarities, Journal of Economics and Business (2007), doi:10.1016/j.jeconbus.2007.02.003
+Model
JEB-5460; 2
No. of Pages 19
ARTICLE IN PRESS
Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e
Fig. 1. Mergers and acquisitions in the EU banking sector.
a number of reasons, such as improvements in information technology, globalisation of real and nancial markets, increased shareholder pressure and nancial deregulation.2 Regarding the latter factor, in the United States, most restrictions on intrastate banking were abolished by 1990, and lingering geographical restrictions were abolished with the passing of the Riegle-Neal Interstate Banking and Branch Efciency Act (1994). Likewise, the barriers in the US nancial sector between depository institutions, securities and insurance rms were signicantly weakened with the passing of the Financial Services Modernization Act (1999). As a result, from 1980 to 2003 the number of banks in the United States declined from around 16,000 to 8,000, and the share of the ten largest banks rose in terms of total assets from 22% to around 45%.3 The creation of the single market for nancial services in the early 1990s and, more recently, the introduction of the euro have helped to accelerate this process of nancial consolidation also in Europe. During the late 1990s, the volume and number of M&As increased in the euro area in parallel with the creation of Monetary Union (Fig. 1). According to most bankers and academics, however, the process of banking integration is far from complete and is expected to continue.4 First, many of the forces underpinning this consolidation process such as the effect of technological change and nancial globalisation will continue to exist. Second, the number of banks per inhabitant in the European Union (EU) is almost double that in the United States, suggesting that there is room for consolidation in the EU. Third, there is still a considerable degree of heterogeneity across EU countries in terms of banks concentration.5 In terms of the impact of nancial consolidation on bank performance, a large number of empirical studies have been devoted to this issue in the United States, but scant evidence is available in the EU. At the same time, empirical results in the United States could also be of interest in Europe, given that the process of nancial deregulation began earlier in the United States than in the EU. In terms of methodology, the empirical literature analysing the effects of consolidation on banks performance follows two main empirical methods. The majority of studies follow event study-type methodology, often based on changes in stock market prices around the period of
2 3 4 5
See Group of Ten (2001). Piloff (2004). See, for instance, McKinsey (2002) and Morgan Stanley (2003). See, for instance, ECB (2004).
+Model
ARTICLE IN PRESS
3
the announcement of the merger. These studies typically try to ascertain whether the announcement of a bank merger creates shareholder value (normally in the form of cumulated abnormal stock market returns) for the shareholders of the target, the bidder and/or the combined entity. The underlying hypothesis of these studies is that excess returns around the announcement day could explain the creation of value associated with the merger. Following this procedure, the majority of US studies nd mixed or negative results and show that most bank mergers create shareholder value only for the shareholders of the target institution, normally at the expense of the bidding institution (for a review, see Beitel & Schiereck, 2006; Piloff & Santomero, 1998).6 Recent US studies have provided an interesting contribution by sub-sampling the population of merging banks according to their product or market-relatedness. The objective of such studies is to establish whether certain shared characteristics between merging institutions could create or destroy shareholder value. These studies build on established evidence from the corporate nance literature which suggests that by focusing on their core business, companies could improve their protability and market value. Empirical results from the United States show that mergers of banks showing substantial dissimilarities in terms of geographical or product strategies could destroy overall shareholder value (see Amihud, De Long, & Saunders, 2002; Houston & Ryngaert, 1994). DeLong (2001) and Cornett et al. (2003) argue that only bidders that focus both on geography and product-relatedness do not destroy value. Using a unique database, Deng and Elyasiani (2005) nd that geographic diversication is associated with insignicant value effects and a signicant decline in banks risk, thereby providing a rationale for the nancial consolidation witnessed in recent years.7 A second group of studies measure the impact of nancial integration on bank performance via accounting ratios of performance (such as return on assets) or productive efciency indicators (such as indicators of scale economies). The potential for scale economies is often one of the mains reasons given by practitioners to justify M&As. However, the majority of US studies nd that these potential efciency gains resulting from size rarely materialise after the merger (see Berger, Demsetz, & Strahan, 1999; Berger, DeYoung, Genay, & Udell, 2000; Piloff, 1996). A possible reason for this is that some efciency gains may take a long time to accrue.8 More specically, while some efciency gains (such as those derived from risk diversication or the benets of brand name) can be accrued in the short run, others, such as the benets derived from cost reductions or the majority of scope economies, may take longer to materialise. This is probably due to the difculties of integrating broadly dissimilar institutions (see Vander Vennet, 2002). In line with the results of event studies, the few studies analysing the effect of M&A activity on actual operating performance do not nd a signicant impact of nancial consolidation on protability in the US banking sector (Linder & Crane, 1993; Rhoades, 1994). At the same time, geographical diversication often measured as interstate banking expansion seems to lead to higher operating performance and earnings volatility (see Rivard & Thomas, 1997). In Europe, the handful of cross-country studies conducted to date nd that bank mergers and acquisitions accrue signicant stock market valuation and operating performance gains (see Beitel & Schiereck, 2006; Cybo-Ottone & Murgia, 2000; Diaz, Garcia Olalla, & Sanlippo Azofra,
6 7 8
By contrast, Houston et al. (2001) nd evidence of some revaluation for certain subsets of banks. This result is also in line with Akhibe and Whyte (2003) and Hughes et al. (1999). See Focarelli and Panetta (2003) and Diaz et al. (2004).
+Model
JEB-5460; 4
No. of Pages 19
ARTICLE IN PRESS
2004), particularly in the case of product-focused transactions (Beitel, Schiereck, & Wahrenburg, 2004).9 Overall, then, very little effort has been directed towards understanding how the degree of relatedness between merging rms affects post-merger operating performance, particularly in Europe. We attempt to address this issue by using a wide sample of merging banks, and analyse the factors that are expected to inuence the success of M&As by considering whether a merger of rms with similar strategic orientation leads to higher protability. 2. Strategic t and performance The above discussion of the empirical literature on M&As highlights the importance of product and geographical similarity for post-merger performance. To investigate this issue further, we borrow our model from the strategic management literature. Corporate strategists have long recognised that the strategic t between merging partners is a critical factor in determining the success or failure of a deal. Levine and Aaronovitch (1981) and Lubatkin (1983) were among the rst to stress the importance of studying the strategic and organisational aspects of M&A activity. Building on this idea, Markides (1992) analysed this issue with regard to the United States in the 1980s, which was a period in which many rms reduced their diversication by refocusing on their core business. He found that rms announcing a strategic shift towards refocusing on their core activities experienced a signicant improvement in their market value. The underlying hypothesis of Markides research is that while diversifying has some benets for corporations, there is a decline in the marginal benet of diversifying. At the same time, there is also an increase in the marginal costs associated with diversifying. In other words, as rms diversify away from their core business, marginal prots tend to decrease while marginal costs tend to rise (Markides, 1992). For banks, expanding into new products and geographical areas has a number of advantages. Clearly, it allows nancial institutions to diversify both their risks and their sources of revenue, thereby providing a buffer in the event of geographic or product-related shocks.10 In addition, diversication enables banks to obtain additional benets derived from a more extensive use of rm-specic assets, such as brand name, consumer loyalty or top-quality managers. In the specic case of large banks involved in both commercial and investment banking activities, the benets of diversication could also include those derived from scope economies or the ability to quickly mobilise additional nancial funds in order to obtain certain investment banking deals. Finally, assuming that banks create effective internal capital markets, diversication would reduce the cost of nancing for banks (see Houston, James, & Marcus, 1997). At the same time, as mentioned above, diversication has a number of potential disadvantages. As a nancial institution becomes more complex, it is more difcult for managers to control the entity, possibly leading to less efcient internal control procedures and duplicated or overlapping expenses. A related issue is that as rms diversify, it is more difcult to create the right
9 Comparing pre- and post-merger performance among European banks, Vander Vennet (1996) nds that domestic mergers of similar-sized partners are protability-enhancing. 10 Winton (1999) argues that diversication reduces the odds of bank failure and improves performance. At the same time, when banks loans have very high downside risks, diversication can actually increase the odds of bank failure, particularly if diversication involves expansion into sectors where the bank lacks expertise. This is conrmed by the empirical results from Acharya et al. (2006), who, using a sample of Italian banks, found that for high-risk banks, diversication produced even riskier banks.
+Model
ARTICLE IN PRESS
5
incentives and to rationalise a workforce. For instance, it might be more complex to create a homogeneous corporate culture for universal banks that are active in both commercial and investment banking activities. In this respect, inefciencies may be created when managers apply their existing dominant logic to newly acquired but strategically dissimilar banks (Prahalad & Bettis, 1986). Similarly, as diversity increases, the internal power struggle between divisions of diversied rms could intensify, leading to a less efcient allocation of resources11 (see Rajan, Servaes, & Zingales, 2000). In addition, a more diversied nancial institution may be more difcult to understand for investors. Thus, it might be difcult for a diversied bank to optimise market value as investors tend to shun opacity. Likewise, managers may choose diversication to reduce risk even when shareholder wealth would be more likely to be maximised by not entering into new lines of business or geographical areas. 3. Methodology and data issues 3.1. Methodology Normally, each organisation sets its own goals and objectives together with its preferred strategy. It is therefore possible to differentiate between rms on the basis of their fundamental choices expressed in terms of long and short-term strategies. Their success is, by and large, dependent on their choice of strategy. We build on the model suggested by Ramaswamy (1997), who analysed the impact of M&As on performance in the US banking sector according to the similarities between target and bidder. The model relates changes in performance before and after a merger to a set of strategic indicators and a set of control variables. Strategy researchers have used resource allocation patterns as indicators of the underlying strategies pursued by organisations (Dess & Davis, 1984; Zajac & Shortell, 1989). For instance, rms which have adopted a cost-efciency strategy tend to exhibit lower levels of operational expenditure to total assets than other rms. In sum, the concept of strategic similarity used in this paper also assumes that the major aspects of an organisations strategy can be seen in the resource allocation decisions that its management takes. Hence we assume that if two rms show similar resource allocation patterns, measured from their balance sheet statements, across a variety of strategically relevant characteristics, they can be broadly considered to be strategically similar (Harrison, Hitt, Hoskisson, & Ireland, 1991). We rst identify the nancial features of targets and bidders, considering the main characteristics regularly used by practitioners to analyse the nancial performance of banks.12 As in Ramaswamy (1997), we measure the strategic similarity of rms involved in M&A activity by using a simple indicator containing the nancial characteristics for each strategic variable and individual merger: SIi,k = (XB,i,k XT,i,k )2 (1)
Hence SIi,k is the similarity index for the kth variable for the ith merger, and XB,i,k and XT,i,k are the scores of the target (Tn) and the bidder (Bn) for the kth variable. In terms of sampling, we prefer to examine domestic and cross-border merger results separately. This is because most prac-
11 This is because headquarters have limited power over the divisions of the entity. This is characterised by models of power-seeking (see Shleifer & Vishny, 1989). 12 See McKinsey (2002).
+Model
JEB-5460; 6
No. of Pages 19
ARTICLE IN PRESS
Table 1 Denition of the strategic variables (in percentages) Dimension Performance change Liquidity Efciency Capitalisation Loan ratio Credit risk Diversity of earnings Off-balance sheet activity Deposit activity Other expenses Bidder performance Relative size Time dummies Country dummies Symbol ROE LIQ COST/INC CA/TA LOAN/TA BADL/INT INC OOR/TA OBS/TA LOANS/DEP TECH PREROE B RSIZE TD CD Formula Return on equity (post-merger) weighted return on assets (pre-merger) Liquid assets to total deposits Total costs to income Total capital to total assets Loans to total assets Loan loss provisions to net interest revenues Other operational revenues to total assets Off-balance sheet items to total assets Customer loans to customer deposits Other expenses to total assets Return on equity of the bidder (pre-merger) Total assets of target to total assets of bidder Yearly time dummies Country dummies
Sources: Bankscope and Thomson Financial Deals.
titioners consider the characteristics, motives and performance implications to be very different for domestic and cross-border mergers.13 Building on the approaches by Datta, Grant, and Rajagopalan (1991), Chatterjee, Lubatkin, Schweiger, and Weber (1992) and Ramaswamy (1997), the dependent variable used is the change in performance, which is measured as the difference between the merged banks 2-year average return on equity (ROE) after the acquisition and the weighted average of the ROE of the merged banks 2 years before the acquisition ( ROE).14 We also use a variety of nancial indicators (SIi,k ) to dene the strategic features of banks. These indicators include measures of nancial performance, asset and liability composition, capital structure, liquidity, risk exposure, protability, nancial innovation and efciency (see Table 1). Among the explanatory variables, relative size (RSIZE) and merger performance of the bidder (BID ROE) are included as additional control variables (Xi,j ), as these variables are expected to be important determinants of bank performance, as well as country (CDx ) and time dummies (TDl )15 :
n n 2 n 9 14 8
ROEi =
i=1 i=1 j=1
Xi,j +
i=1 k=1
SIi,k +
x=1
CDx +
l=1
TDl
(2)
The relationship between changes in performance ( ROE) and efciency (COST/INC) is expected to depend on whether banks are involved in domestic or cross-border M&As. When domestic consolidation takes place, cost economies related to factors such as overlapping branches and shared technology are probably easier to implement. For cross-border deals, according to most practitioners, potential revenue-enhancing and risk diversication aspects generally prevail over
Cross-border mergers are dened as those in which the merging institutions are situated in different EU countries. We consider a 2-year time window for three main reasons. First, it is difcult to single out the impact of a single merger from the others in the sample as a few of the banks in the sample merged several times. Second, when considering a longer time span, the effect of other economic factors could distort the results. Third, when considering a longer time span, the sample size shrinks dramatically, particularly with regard to cross-border mergers. As a robustness check, Appendix A analyses the results for a 4-year window and nds the results broadly unchanged. 15 From a different perspective, Vander Vennet (2002) emphasises the relationship between bank efciency and size also in Europe.
14 13
+Model
ARTICLE IN PRESS
7
cost efciency-related considerations. This is also because the potential for cost enhancements in cross-border deals is often hampered by greater differences in terms of corporate culture and less overlap in terms of branches and other operational aspects. The relationship between the variables measuring the relative size of target and bidder (RSIZE) and performance ( ROE) is an ambiguous one (see Amaro de Matos, 2001). It can tentatively be said that for domestic mergers, the smaller the size of the target compared with the bidder (i.e. the lower the RSIZE ratio), the easier it is to impose cost restructuring and realise cost savings. For this reason, a negative relationship between relative size (RSIZE) and performance ( ROE) is expected. By contrast, in the case of cross-border mergers, the goal of the bidder is seldom rapidly achieved cost economies but rather revenue-enhancing benets. As a consequence, for crossborder mergers, a positive relationship between relative size (RSIZE) and performance changes ( ROE) is anticipated. The level of the bidders pre-merger performance (PREROE B), measured as its return on capital, is also likely to inuence the post-merger performance of the combined entity ( ROE). If a bidder has a high level of protability before the merger, it is more likely that the protability of the new institution will decrease in the short term. Conversely, it is probable that bidders with a lower level of performance will manage to increase their protability. As a consequence, a negative relationship between bidders PREROE B and ROE is expected initially (see Vander Vennet, 2002). To measure the strategic similarities of rms involved in M&A activity, several indicators of the strategic relatedness of the merging rms are obtained. First, the earnings diversication strategy, which is a broad product strategy, refers to the emphasis on other sources of income apart from the traditional net interest revenues. Maximisation of non-interest revenue as a general strategy is measured by the ratio of other operational revenue to total assets (OOR/TA). The focus on or exposure to off-balance sheet activities (OBS) is measured as the ratio of off-balance sheet activity to total assets (OBS/TA). At the outset, dissimilarities in non-interest income sources of revenue (OOR/TA) and in off-balance sheet activities exposure (OBS/TA) are both expected to enhance post-merger performance ( ROE) as they could help to broaden access to nancial innovation and new sources of revenue (see Gande, Puri, & Saunders, 1997; Harrison et al., 1991). This positive relationship is expected to be particularly strong in the case of domestic mergers, where homogeneity among merging entities tends to be higher and the difculties associated with the integration of new products are normally lower than in the case of cross-border mergers (see Harrison et al., 1991). Second, banks strategies in relation to their credit risk and loan-to-deposit proles are examined. The credit risk strategy is measured as the level of loan loss provisions divided by net interest revenues (LLP/IR). Regarding banks loan and deposit proles, the ratio of total loans to total customer deposits (L/D) is included, as it provides a proxy for the use of relatively low-cost deposits in relation to the amount of loans outstanding. In addition, banks broad balance sheet loan composition is measured as the ratio of net loans to total assets (NL/TA), which takes into account the prominence of loans in banks total assets. In general, post-merger performance can be expected to worsen when banks with very different asset quality and overall portfolio strategies merge. Since economies of scale and the fast integration of the cost base are essential goals of a large number of domestic mergers, conicts arising from managerial disparities with regard to critical decisions, such as asset quality or the overall portfolio strategy structure, may be an obstacle to creating such synergies. Overall, the greater the difference between merging banks strategies, the lower the performance after merging is initially
+Model
JEB-5460; 8
No. of Pages 19
ARTICLE IN PRESS
expected to be. The opposite may happen in cross-border mergers, as one of the goals of such operations may be to improve revenues derived from the inclusion of new portfolio strategies or to reduce the risk prole of one of the merging partners (see Demsetz & Strahan, 1997). Third, the cost controlling strategy, which shows the emphasis on minimising costs by relating expenditure to revenues, is measured by the cost to total income ratio (CIR). As a result of economies of scale and scope stemming from the combination of similar skills, a rm competing on the basis of low cost and operating efciency is expected to benet from merging with another organisation characterised by a set of similar competencies. Firms characterised by different cost controlling strategies, however, may show a drop in performance if they merge (see Altunbas, Molyneux, & Thornton, 1997; Prahalad & Bettis, 1986). As a consequence, the cost to income ratio (CIR) is expected to be negatively correlated with overall performance (ROE). On the other hand, this kind of relationship may not be signicant in the long term if a cost-efcient bidder manages to implement its low-cost strategy across the larger merged rm. This may also be the case for cross-border M&As, where cost controlling may not be the main strategic advantage sought by the rms involved (see Berger et al., 2000). Fourth, the capital adequacy level is measured as the ratio of equity to total assets (CA/TA). Practitioners, analysts and regulators have attached increased importance to this variable in recent years. From a prudential regulatory perspective, bank capital has become a focal point of bank regulation (see Vives, 2000). The effect of changes in the capital adequacy level on performance depends on the theory of the banking rm. According to the signalling hypothesis, commercial banks specialise in lending information to problematic borrowers (Berger, Herring, & Szego, 1995). Since bank managers usually have a stake in the capital of the bank, it will prove less costly for a good bank to signal better quality through increased capital than for a bad bank.16 Therefore, banks can signal favourable information by merging with banks with larger capital ratios, indicating a positive correlation between capital and earnings, and suggesting a positive relationship between capital structure dissimilarities and performance (see Acharya, 1988). Conversely, Ross (1977) argues that lower, rather than higher, capital ratios signal positive information, since signalling good quality through high leverage would be less onerous for a good bank than for a bad bank.17 Fifth, the liquidity risk strategy is measured as the ratio of liquid assets to customer and shortterm funding (LIQ). As maintaining a generous liquidity ratio is expensive, different liquidity management strategies might imply that one of the merging banks can improve its liquidity management after the merger, thereby improving performance. Finally, the strategy of banks in terms of technology and innovation is measured as other costs (i.e. total costs excluding interest, staff and other overhead payments) to total assets (TECH). Dissimilarities in investment in technology between the bidder and the target are expected to produce better performance as each of the merging partners may benet from returns to scale and scope derived from the investments made by their merging counterpart. In the case of cross-border mergers, however, where technological incompatibilities are likely to be greater, differences in strategy may lead to a drop in performance (see Harrison, Hall, & Nargundkar, 1993).
16 17
Berger (1995, p. 436). Another argument regarding changes in the capital structure and performance relates to agency problems between shareholders and managers. Some of the corporate nance literature suggests that increasing nancial leverage could reduce this type of agency problem. The reason for this is that leverage may increase pressure on bank managers to become more efcient owing to short-term pressures arising from debt-servicing needs (see Berger et al., 1995; Jensen, 1986).
+Model
ARTICLE IN PRESS
9
3.2. Data sources Our data cover registered mergers and acquisitions that took place in the EU banking sector between 1992 and 2001. Two hundred and sixty-two such M&As took place, of which 207 were domestic and 55 were cross-border. To be included in the sample, both the target and the bidder banks had to be independent commercial banks based in an EU Member State at the time of the merger, and the bidder must not have been involved in any other merger in the 3 years prior to the merger. Individual deal-by-deal data on the M&A activity of nancial rms were obtained using the SDC Platinum database from Thomson Financial. The accompanying individual accounting data for each of the merged companies were taken from the Bank Scope database of Bureau Van Dyck. 4. Results The descriptive statistics (see Table 2) indicate that, in terms of size, as measured by total assets, the bidders are on average around seven times larger than the targets. Bidders are also more costefcient than targets, particularly in the case of domestic mergers. On the other hand, targets have larger loan and non-interest income to total assets ratios. Targets also have substantially less capital leverage than bidders. Comparing domestic and cross-border M&As, domestic targets tend to have a better credit risk prole than the bidders, whereas in cross-border M&As the level of loan loss provisions is broadly similar for targets and bidders. The main differences relate to the size and quality of assets, suggesting that cross-border mergers are mainly to be expected from larger institutions which, probably as a result of greater information asymmetries, take over institutions with better credit quality and capital ratios. The overall picture, then, is of large and generally more efcient banks taking over relatively less risky, smaller institutions with more diversied sources of income. In many respects, the nancial features of bidders and targets engaged in domestic consolidation are similar to the features of those involved in cross-border deals. Following a cross-border merger, the performance ( ROE) of the new joint entity increases by around 2.5%, in terms of the return on capital (see Table 3). The improvement in performance is also conrmed by the median increase in returns of around 1.5%. Banks entering into domestic mergers experience, on average, an improvement in performance of 1.2%. Owing to the scarcity of European studies, this nding is interesting in itself, but it is also striking because most US empirical literature nds no abnormal stock market returns or improved post-merger efciencies. The nding, however, is broadly consistent with results by Houston, James, and Ryngaert (2001) for the United States and Diaz et al. (2004) for Europe. In terms of size, the relative size of targets compared with bidders tends to be smaller in domestic than in cross-border deals. The median gures for the relative size indicator (RSIZE) show that targets are around 21% of the size of bidders for cross-border mergers and 19% for domestic mergers. The main strategic differences among variables are shown in detail in Table 3. The median and mean in Table 3 could be directly interpreted as a measure of dispersion between merging partners in the units of the underlying variable expressed as percentages.18 Concerning the differences
18 For instance, a mean in the relatedness index of 22.5 for a specic variable would indicate an average absolute difference among merging partners of 22.5% on that given variable.
+Model
JEB-5460; 10
No. of Pages 19
ARTICLE IN PRESS
Table 2 Descriptive statistics of the main ratios of the merging institutions Variablesa Cross-border Mean Target Total assetsb Liquid assets to total deposits Total costs to income Total capital to total assets Loans to total assets Loan loss provisions to net interest revenues Other operational revenues to total assets Off-balance sheet items to total assets Customer loans to customer deposits Other expenses to total assets Bidder pre-merger Total assetsb Total assetsb Liquid assets to total deposits Total costs to income Total capital to total assets Loans to total assets Loan loss provisions to net interest revenues Other operational revenues to total assets Off-balance sheet items to total assets Customer loans to customer deposits Bidder post-merger Total assetsb Total assetsb Liquid assets to total deposits Total costs to income Total capital to total assets Loans to total assets Loan loss provisions to net interest revenues Other operational revenues to total assets Off-balance sheet items to total assets Customer loans to customer deposits
a b
Domestic S.D. 65,373 18.2 17.0 8.6 19.3 24.9 0.7 29.0 45.7 0.4 183,144 18.0 13.4 2.1 13.3 23.2 0.6 49.9 35.4 0.4 233,659 15.1 14.1 2.1 14.1 36.8 0.7 23.8 22.8 0.4 Mean 18,202 30.3 71.5 6.9 51.8 27.9 1.3 18.9 71.8 1.3 61,437 28.2 68.1 5.7 49.0 19.5 1.1 28.3 67.5 1.1 81,609 29.3 68.1 5.9 50.9 16.6 1.2 20.6 71.5 1.0 Median 2,554 27.7 72.0 5.7 49.7 18.7 1.1 12.6 60.4 1.2 19,296 26.0 69.5 5.1 49.6 17.1 1.0 16.6 62.7 1.0 25,054 29.6 68.4 5.5 51.8 15.6 1.2 15.5 68.2 0.9 S.D. 40,211 23.4 19.1 6.3 26.3 39.3 1.2 24.4 46.0 0.9 93,762 17.2 12.9 3.3 15.3 12.0 0.9 136.0 48.2 0.7 129,460 14.7 16.2 3.2 15.0 11.6 0.8 18.9 38.7 0.6
Median 24,629 28.2 69.8 5.0 49.1 16.9 1.1 15.8 65.0 0.9 166,548 25.7 69.1 3.8 47.9 19.0 1.1 19.0 64.9 0.8 201,665 23.3 68.5 3.9 44.5 14.0 1.5 23.5 61.1 0.8
58,667 30.7 68.7 6.9 48.7 24.1 1.2 24.9 70.1 0.9 208,597 29.9 66.9 4.5 45.9 24.4 1.1 28.7 68.9 0.8 267,694 24.9 67.1 4.5 45.6 23.0 1.4 27.0 63.9 0.8
See Table 1 for a denition of the variables. Total assets in US dollars (millions). Since the standard deviations could be substantial for some of the ratios, Appendix B also considers whether the differences between bidders and targets are statistically signicant.
between domestic and cross-border deals in the indices of relatedness, targets and bidders are quite different in terms of their credit risk, off-balance sheet and liquidity strategic positions. They also differ in capital structure, albeit to a lesser extent. Appendix C considers the correlations among the different variables. As expected, we nd some correlation between those ratios that share the same balance sheet item on their numerator or denominator (such as LOAN/TA and OOR/TA). This suggests the possibility of some multicollinearity between some of the variables. Hence, we employ stepwise maximum likelihood estimation to single out the model and take into account that some of the variables might show
+Model
ARTICLE IN PRESS
11
Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e Table 3 Descriptive statistics of the main determinants of performance Variables Cross-border Mean Dependent variable Performance change Control variables Relative size Bidder performance Strategic relatedness Liquidity Efciency Capitalisation Loan ratio Credit risk Diversity of earnings Off-balance sheet activity Deposits activity Other expenses 2.44 0.79 9.41 21.01 15.70 4.00 18.06 22.50 0.72 27.47 37.10 0.56 Median 1.68 0.21 8.94 18.74 10.82 1.95 14.08 13.94 0.52 12.96 25.05 0.32 S.D. 5.44 1.62 5.88 17.60 14.03 8.48 15.31 27.78 0.60 50.83 42.01 0.38 Domestic Mean 1.22 0.75 8.11 12.94 16.49 3.47 18.16 18.22 0.81 22.10 35.59 0.63 Median 1.05 0.19 8.02 8.82 11.83 1.75 10.88 7.05 0.48 7.10 17.19 0.43 S.D.
5.37 2.16 6.20 13.28 15.89 6.13 24.03 36.11 1.15 128.96 56.21 0.80
Note: The strategic variables show the values of the similarity index for each variable.
multi-collinearity.19 Possible idiosyncratic heterogeneity effects are taken into account through the use of country and time dummies. These dummies are particularly important to lter out macroeconomic and regulatory factors.20 Table 4 illustrates the responsiveness of banks post-merger performance to a set of main control variables (model 1) and an additional set of variables measuring strategic similarity. Model 1 shows the impact of the control variables on post-merger performance, whereas model 2 also includes the strategic variables. The results are given separately for cross-border and domestic mergers to take into account the distinct differences between the two types of merger. As expected, the results indicate that size differences between merging partners play a major role in inuencing performance, but the impact differs markedly for domestic and cross-border mergers. For domestic mergers, the larger the target bank is by comparison with the bidder, the lower the post-merger performance, which reects the difculty of assimilating larger institutions. By contrast, for crossborder mergers, the larger the target is by comparison with the bidder, the better the post-merger performance is on average. This is probably because in cross-border mergers, the goal of the bidder is generally not to achieve rapid cost economies but rather to gain benets deriving from other synergies. The results for pre-merger bidder return on capital (PREROE B) suggest that a relatively high level of performance on the part of the bidder tends to negatively affect the level of performance of the new entity after the merger. These results are in line with the oor/ceiling effect of
19 In the case of cross-border mergers, we consider the country of the bidder. The regression weights the impact on the parameters of the size of the bidder institution. As a robustness check, we also ran the ridge regression method to account for the possible distortion on the coefcients derived from linear dependencies among variables and this showed broadly similar results. 20 Since M&As normally come in waves (see Shleifer & Vishny, 2003), the use of time dummies is also helpful to lter out the effect on changes in performance of years of particularly high M&A activity.
+Model
JEB-5460; 12
No. of Pages 19
ARTICLE IN PRESS
Table 4 Results of hierarchical regression analysis of the impact on change in performance of strategic and other control variables Variables Domestic Model 1 Relative size Bidder performance level Efciency Capitalisation Loan ratio Credit risk Diversity of earnings Other expenses Off-balance sheet activity Liquidity Deposit activity Intercept R2 -adj F-value 5.133* (0.2603) 0.425 217.080 0.443* (0.0516) 0.538* (0.0153) Model 2 0.335* (0.0495) 0.540* (0.0148) 0.057* (0.0057) 0.070* (0.0148) 0.026* (0.0052) 0.001 (0.0025) 0.589* (0.0843) 0.827* (0.1513) 0.003* (0.0006) 0.001 (0.0069) Cross-border Model 1 0.325* (0.0607) 0.468* (0.0358) Model 2 0.327* (0.0587) 0.494* (0.0358) 0.044** (0.0149) 0.202* (0.0218) 0.095* (0.0145) 0.013 (0.0078) 0.318 (0.3531) 4.150* (0.5808)
0.003 (0.0017) 6.474* (0.2827) 0.488 123.120
0.007 (0.0037) 0.033* (0.0102) 7.152* (0.4776) 0.404 62.740 0.009+ (0.0041) 9.573* (0.5327) 0.537 47.230
Note: *,+, Signicant at the 1%, 5% and 10% levels, respectively. Model 1 includes the control variables only. Model 2 is the complete model, which includes both the control and strategy variables. The standard errors of the coefcients are in parenthesis.
the empirical literature (see Ramaswamy, 1997). In other words, as bidders tend to have higher performance levels than targets, a certain balancing of performance between bidders and targets is likely to take place after the merger.21 Differences in efciency levels, measured as the cost-to-income ratio, are disadvantageous from a performance perspective. This could be due to the difculty of integrating banks with very different cost structures, particularly in the short term. As indicated, rms characterised by different cost controlling strategies could experience a drop in performance if they merge (see Altunbas et al., 1997). This nding may be related to US evidence showing that there is generally very little improvement in cost efciencies after a merger (see DeYoung, 1997; Rhoades, 1994). Concerning the differences in capital structure, in the case of domestic mergers, capital level differences are performance-enhancing. For cross-border M&As, however, dissimilarities in the capital structures tend to result in lower performance. Since capital is often used by banks to signal favourable asset quality, it seems to be more difcult for cross-border mergers (where asymmetries of information between merging partners are larger than for domestic mergers) to integrate institutions with different capital structures. The results for the diversity of earnings, credit risk and loan-to-asset ratio variables show that, for domestic deals, it can be quite costly to integrate institutions which are heterogeneous in terms of their earnings and loan strategies. In other words, the more the bidders type of business differs from that of the target in a domestic merger, the worse the post-merger performance will be. The cost-cutting focus of the bulk of domestic operations coupled with the usual conicts arising from managerial disparities with regard to critical decisions could account for this effect. This is in line with the bulk of the US literature, which suggests that the corporate focus tends to be on enhancing performance.
21
It is useful to include time dummy variables to account for idiosyncratic heterogeneity.
+Model
ARTICLE IN PRESS
13
By contrast, in cross-border M&As, the greater the difference is in credit risk and the loan-tototal assets position, the better the average improvement in performance. This supports the theory that enhanced revenues derived from scope economies and broad complementarities between merging institutions are one of the major drivers of cross-border M&As. In addition, it also signals banks concern with becoming large international players, as size is perceived to be a major requirement for signicant participation in investment banking activities (see Cabral et al., 2002). The results on technology and innovation strategies suggest that differences in terms of innovation investment between bidders and targets impact post-merger performance. The more dissimilar banks strategies are, the better on average their post-merger performance, as merging partners benet from the investments in nancial innovation and technology made by their counterpart. However, dissimilarities in strategy may create problems in cross-border M&As because the strategies of the merging partners may be incompatible. Finally, in terms of the deposit strategies of merging partners, increased relatedness contributes to enhanced performance for both domestic and cross-border mergers, with the effects being stronger for cross-country mergers, which normally involve greater integration difculties. 5. Conclusion The aim of this paper was to shed light on the process of nancial consolidation in the EU by assessing whether strategic and organisational t between nancial institutions involved in mergers and acquisitions plays an important role in improving post-merger nancial performance. We used a relatively simple approach, taking a strategic management and resource-based view of the rms by accepting that nancial decisions are, to some reasonable extent, a reection of the main underlying strategies of banks. The empirical analysis was carried out on an extensive sample of individual European banks M&As, which was linked to individual bank accounting information. Results from the descriptive analysis show that the overall statistical picture is of large, generally more efcient banks merging with relatively smaller and better capitalised institutions with more diversied sources of income. By contrast with the results of most of the US literature, we found that there are improvements in performance after a merger has taken place, particularly in the case of cross-border M&As. In terms of the impact of strategic relatedness on performance, the overall results show that broad similarities between merging partners are conducive to improved performance, although there are signicant differences between domestic and cross-border M&As and those involving different strategies. On average, we found that consistency in the efciency and deposit strategies of merging partners is performance-enhancing, both for domestic and for cross-border M&As. For domestic mergers, we found that dissimilarities in earnings, loan and deposit strategies can have a deleterious effect on performance, whereas differences in capitalisation, technology and innovation strategies were found to improve performance. By contrast, for cross-border M&As, differences in loan and credit risk strategies are performance-enhancing, whereas a lack of coherence in capitalisation, technology and nancial innovation strategies has a negative effect on performance. This lends support to the widespread view that difculties often arise when integrating institutions with widely different strategic orientation. Acknowledgements We are very grateful for the useful comments received from an anonymous referee as well as from Hans-Joachim Kl ckers, Phil Molyneux, Rudy Vander Vennet, Rebecca Young, and Jukka o
+Model
JEB-5460; 14
No. of Pages 19
ARTICLE IN PRESS
Vesala. We would also like to warmly thank Jean-Paul Genot for his help in pointing us towards the right sources of information. Appendix A
Table 4 Results of hierarchical regression analysis of the impact on change in performance of strategic and other control variables Variables Domestic Model 1 Relative size Bidder performance level Efciency Capitalisation Loan ratio Credit risk Diversity earnings Other expenses Off-balance sheet act Liquidity Deposit activity Intercept R2 -adj F-value 0.985* (0.137) 1.198* (0.0274) Model 2 0.591* (0.1293) 1.216* (0.0252) 0.076* (0.009) 0.059* (0.0216) 0.067* (0.010) 0.017 (0.0068) 0.636* (0.155) 2.396* (0.301) 0.005* (0.0008) 0.067* (0.0143) Cross-border Model 1 0.193 (0.1209) 0.264* (0.0534) Model 2 0.112 (0.1312) 0.147+ (0.069) 0.002 (0.10) 0.820* (0.145) 0.033* (0.007) 0.0260+ (0.0122) 3.072 (0.600) 6.231* (1.401) 0.036* (0.007) 0.027* (0.0100) 0.0205* (0.0024) 10.169* (0.400) 0.537 47.230
20.523* (1.621) 0.745 451.44
0.004 (0.0014) 13.541* (2.053) 0.791 254.55
49.579* (3.739) 0.845 256.36
Note: *,+, Signicant at the 1%, 5% and 10% levels, respectively. Model 1 includes the control variables only. Model 2 is the complete model, which includes both the control and strategy variables. The standard errors of the coefcients are in parenthesis.
+Model
ARTICLE IN PRESS
15
Appendix B
Table 4 Domestic mergers: descriptive statistics and statistical differences of nancial features of target and bidder banks Variablesa Bidders Mean Target Total assetsb Liquid-assets-to-deposits ratio Cost-to-income ratio Capital-to-total assets ratio Loans to total assets Loan provisions-to-int. ratio Other operating inc. to total assets Off-balance sheet to total assets Customer loans-to-deposits ratio Return on equity Return on assets Other expenses to total assets
a b *
Targets S.D. 93761 17.2 12.8 3.2 15.3 12.0 0.8 135.9 48.2 9.0 0.4 1.4 Mean 1820* 30.2 71.5* 6.9* 51.8 27.9* 1.3 18.9 71.7 0.4* 0.2* 3.5* S.D. 40210 23.3 19.1 6.3 26.2 39.3 1.1 24.4 45.9 27.2 1.2 1.9
61436* 28.1 68.0* 5.6* 49.0 19.4* 1.1 28.2 67.4 7.8* 0.5* 2.8*
See Table 1 for a denition of the variables. Total assets in US dollars (millions). Indicates that bidders and targets means of each variable are statistically different at 5% (paired t-test).
Table 4 Cross-border mergers: descriptive statistics and statistical differences of nancial features of target and bidder banks Variablesa Bidders Mean Target Total assetsb Liquid-assets-to-deposits ratio Cost-to-income ratio Capital-to-total assets ratio Loans to total assets Loan provisions-to-int. ratio Other operating inc. to total assets Off-balance sheet to total assets Customer loans-to-deposits ratio Return on equity Return on assets Other expenses to total assets
a b *
Targets S.D. 183144.1 18.0 1.8 2.1 13.3 23.1 0.1 49.8 35.4 9.1 1.1 0.1 Mean 58666.87* 30.6 68.7 6.9 48.7 24.1 1.2 24.9 70.1 6.7 0.5 2.6* S.D. 65372.9 18.2 2.2 8.6 19.3 25.0 0.1 29.0 45.7 16.4 1.1 0.2
208597.4* 29.9 66.8 4.5 45.9 24.3 1.1 28.7 68.8 9.0 0.3 2.1*
See Table 1 for a denition of the variables. Total assets in US dollars (millions). Indicates that bidders and targets means of each variable are statistically different at 5% (paired t-test).
16
JEB-5460;
+Model
Appendix C
Table 4 Correlation matrix of the variables ROE Cross-border ROE RSIZE BID ROE LIQ COST/INC CA/TA LOAN/TA BADL/INT INC OOR/TA OBS/TA LOANS/DEP TECH 1 0.43* 0.51* 0.19 0.25* 0.32* 0.13 0.17 0.13 0.19 0.14 0.7 RSIZE BID ROE LIQ COST/INC CA/TA LOAN/TA BADL/INT I OOR/TA OBS/TA LOAN/DEP TECH
No. of Pages 19
1 0.51* 0.00 0.12 0.00 0.01 0.47* 0.37* 0.02 0.08 0.26*
1 0.08 0.06 0.17 0.19 0.33* 0.30* 0.16 0.08 0.22
ARTICLE IN PRESS
1 0.21 0.17 0.28** 0.11 0.12 0.01 0.04 0.11
1 0.49* 0.31* 0.42* 0.13 0.05 0.22 0.14
1 0.39* 0.08 0.06 0.08 0.28* 0.02
1 0.17 0.21 0.01 0.53* 0.31*
1 0.25* 0.11 0.09 0.16
1 0.11 0.15 0.54
1 0.08 0.12
1 0.08
Domestic ROE 1 RSIZE 010 0.61* BID ROE LIQ 0.09 COST/INC 0.17* CA/TA 0.11 LOAN/TA 0.13* BADL/INT INC 0.08 OOR/TA 0.19 OBS/TA 0.03 LOANS/DEP 0.09 TECH 0.05
1 0.04 0.04 0.07 0.11 0.12 0.05 0.06 0.03 0.08 0.09
1 0.10 0.01 0.05 0.01 0.02 0.13* 0.10 0.5 0.02
1 0.01 0.16* 0.21* 0.00 0.13* 0.02 0.9 0.09
1 0.09 0.32* 0.12* 0.05 0.02 0.16* 0.46*
1 0.03 0.05 0.22* 0.00 0.08 0.17*
1 0.19* 0.15* 0.01 0.42* 0.57*
1 0.12* 0.01 0.17* 0.09
1 0.01 0.1* 0.34*
1 0.03 0.01
1 0.06
Note: *Signicant at 10% level or less.
+Model
Appendix D
Table 4 Mergers and acquisitions in the EU banking sector from 1992 to 2001 (value of transactions in millions of US dollars) Country of target Country of bidder Austria Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom 6,850 0 Belgium 0 19,405 0 7,970 0 358 0 131 2,704 25 0 392 Denmark Finland France Germany 8,427 694 24 0 1,875 64,091 445 0 2,198 0 469 0 881 0 5,245 Greece Ireland 20 Italy 96 41 Lux. 0 0 517 358 Netherlands 0 12,250 1 0 0 0 147 857 6,413 814 124 80 Portugal Spain 0 373 5,141 0 12,001 1,703 281 0 312 181 2,591 0 78 83 0 952 20,819 42 204,509 Sweden UK 0
ARTICLE IN PRESS
126
2,022 8,259 4,426 363 0 2,724 0 109,246 438 267 23 644 0 0 19 0 1,404 397 150 20 0 25 1,302
0 17,399 4,430
640 186 0
0 432 26
408 1,323
0 0 1,155
152,683 18 1,135 2 20 73 0 1,372 370 0 40
907
221 0 26,050 3,992 1,208 53,271 0 2,758
17
+Model
JEB-5460; 18
No. of Pages 19
ARTICLE IN PRESS
References
Acharya, S. (1988). A generalised econometric model and test of signalling hypothesis with two discrete signals. Journal of Finance, 43, 413429. Acharya, V., Hasan, I., & Saunders, A. (2006). Should banks be diversied? Evidence from individual bank portfolios? Journal of Business, 79, 13551412. Akhibe, A., & Whyte, A. M. (2003). Changes in market assessment of bank risk following the Riegle-Neal Act of 19/94. Journal of Banking and Finance, 27, 87102. Altunbas, Y., Molyneux, P., & Thornton, J. (1997). Big-bank mergers in Europe: An analysis of the cost implications. Economica, 64, 317329. Amaro de Matos, J. (2001). Theoretical Foundations of Corporate Finance. Princeton University Press. Amihud, Y., De Long, G., & Saunders, A. (2002). The effects of cross-border bank mergers on bank risk and value. Journal of International Money and Finance, 21, 857877. Beitel, P., Schiereck, D., & Wahrenburg, M. (2004). Explaining the M&A-success in European bank mergers and acquisitions. European Financial Management, 10, 109139. Beitel, P., & Schiereck, D. (2006). Value creation of domestic and cross-border M&A in the European Banking market. ICFAI Journal of Mergers & Acquisitions, 3, 729. Berger, A. N., Herring, R. J., & Szego, G. P. (1995). The role of capital in nancial institutions. Journal of Banking and Finance, 19, 393430. Berger, A. N. (1995). The relationship between capital and earnings in banking. Journal of Money, Credit, and Banking, 27, 432456. Berger, A. N., Demsetz, R. S., & Strahan, P. E. (1999). The consolidation of the nancial services industry: Causes, consequences and implications for the future. Journal of Banking and Finance, 23, 135194. Berger, A. N., Deyoung, R., Genay, H., & Udell, G. F. (2000). Globalization of nancial institutions: Evidence from cross-border banking performance. Brookings-Wharton Papers on Financial Services, 3, 23120. Cabral, I., Dierick, F., & Vesala, J. (2002). Banking integration in the euro area. European Central Bank Occasional Paper, 6. Chatterjee, S., Lubatkin, M., Schweiger, D. M., & Weber, Y. (1992). Cultural differences and shareholder value in related mergers: linking equity and human capital. Strategic Management Journal, 7, 119139. Cornett, M. M., Hovakimian, G., Palia, D., & Tehranian, H. (2003). The impact of the manager-shareholder conict on acquiring bank returns. Journal of Banking and Finance, 27, 103131. Cybo-Ottone, A., & Murgia, M. (2000). Mergers and shareholder wealth in European banking. Journal of Banking and Finance, 24, 831859. Datta, D. K., Grant, J. H., & Rajagopalan, N. (1991). Management incompatibility and post-acquisition autonomy: Effects on acquisition performance. Advance in Strategic Management, 7, 157182. DeLong, G. (2001). Stockholder gains from focusing versus diversifying bank mergers. Journal of Financial Economics, 59, 221252. DeYoung, R. (1997). Bank mergers, X-Efciency, and the market for corporate control. Managerial Finance, 23, 3247. Demsetz, R., & Strahan, R. (1997). Diversication, size and risk at bank holding companies. Journal of Money Credit and Banking, 29, 300313. Deng, E., & Elyasiani, E. (2005). Geographic diversication and BHC return and risk performance. Temple University Working Paper, 135. Dess, G. G., & Davis, P. S. (1984). Porters generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal, 27, 467488. Diaz, B., Garcia Olalla, M., & Sanlippo Azofra, S. (2004). Bank acquisitions and performance: evidence from a panel of European credit entities. Journal of Economics and Business, 56, 377404. European Central Bank. (2004). Report on EU banking structure. Frankfurt am Main, Germany: European Central Bank. Focarelli, D., & Panetta, F. (2003). Are mergers benecial to consumers? Evidence from the market for bank deposits. The American Economic Review, 93, 11521172. Gande, A., Puri, M., & Saunders, A. (1997). Bank underwriting of debt securities: Modern evidence. The Review of Financial Studies, 10(4), 11751202. Group of Ten. (2001). Report on consolidation in the nancial sector. Bank for International Settlements, Basel, Switzerland. Harrison, J. S., Hall, E. H., & Nargundkar, R. (1993). Resource allocation as an outcropping of strategic consistency: performance implications. Academy of Management Journal, 36, 10261051.
+Model
ARTICLE IN PRESS
19
Harrison, J. S., Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (1991). Synergies and post-acquisition performance: Difference versus similarities in resource allocations. Journal of Management, 17, 173190. Houston, J. H., James, C., & Marcus, D. (1997). Capital markets frictions and the role of internal capital markets in banking. Journal of Financial Economics, 46, 135164. Houston, J. H., & Ryngaert, M. (1994). The overall gains from large bank mergers. Journal of Banking and Finance, 18, 11551176. Houston, J. H., James, C., & Ryngaert, M. (2001). Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders. Journal of Financial Economics, 60, 285331. Hughes, J. P., Lang, W. W., Mester, L. J., & Moon, C. G. (1999). The dollars and sense of bank consolidation. Journal of Banking and Finance, 23, 291324. Jensen, M. C. (1986). Agency costs of free cash ow, corporate nance and takeovers. The American Economic Review, Papers and Proceedings, 76, 323329. Levine, P., & Aaronovitch, S. (1981). The nancial characteristics of rms and theories of merger activity. The Journal of Industrial Economics, 30, 149172. Linder, J. C., & Crane, D. B. (1993). Bank mergers, integration and protability. Journal of Financial Services Research, 7, 274282. Lubatkin, M. (1983). Merger and performance of the acquiring rm. Academy of Management Review, 8(2), 218225. Markides, C. (1992). Consequences of corporate refocusing: Ex ante evidence. The Academy of Management Journal, 35, 398412. McKinsey (2002). Europes banks: Verging on merging. McKinsey Quarterly, 3. Morgan Stanley (2003). Consolidation: The prospects examined, equity research. European Banks Industry Review. Piloff, S. J. (1996). Performance changes and shareholder wealth creation associated with mergers of publicly traded institutions. Journal of Money Banking and Finance, 28, 294310. Piloff, S. J., & Santomero, A. M. (1998). The value effects of bank mergers and acquisitions. In Y. Amihud & G. Miller (Eds.), Mergers of Financial Institutions (pp. 5978). Norwell, MA: Kluwer Academic. Piloff, S. (2004). Bank merger activity in the United States 19942003. Federal Reserve Board Staff Studies, 176. Prahalad, C. K., & Bettis, R. A. (1986). The dominant logic: A new linkage between diversity and performance. Strategic Management Journal, 7, 485501. Rajan, R. G., Servaes, H., & Zingales, L. (2000). The costs of diversity: The diversication discount and inefcient investment. Journal of Finance, 55, 3580. Ramaswamy, K. (1997). The performance impact of strategic similarity in horizontal mergers: evidence from the U.S. banking industry. Academy of Management Journal, 40, 697715. Rhoades, S. A. (1994). A summary of bank performance studies in banking and an assessment of the Operating performance and Event study methodologies. Staff Studies, Board of Governors of the Federal Reserve System, 167. Rivard, J. R., & Thomas, C. R. (1997). The effect of interstate banking on large bank holding company protability and risk. Journal of Economics and Business, 49, 6176. Ross, S. A. (1977). The determinants of nancial structure: The incentive-signalling approach. The Bell Journal of Applied Corporate Finance, 8, 2340. Shleifer, A., & Vishny, R. W. (1989). Manager entrenchment: The case of manager specic assets. Journal of Financial Economics, 25, 295489. Shleifer, A., & Vishny, R. W. (2003). Stock market driven acquisitions. Journal of Financial Economics, 70(3), 295489. Vander Vennet, R. (1996). The effect of mergers and acquisitions on the efciency and protability of EC credit institutions. Journal of Banking and Finance, 20, 15311558. Vander Vennet, R. (2002). Cross-border mergers in European banking and bank efciency. In H. Herrmann & R. Lipsey (Eds.), Foreign direct investment in the real and nancial sector of industrial countries (pp. 295315). Springer Verlag. Vives, X. (2000). Lessons from European banking liberalization and integration. In S. Claessensy & M. Jansen (Eds.), The Internationalization of Financial Services (pp. 177198). Kluwer Law International. Winton, A. (1999). Dont put all your eggs in one basket? Diversication and specialization in lending. Wharton School Center for Financial Institutions Working Paper, 0016, September. Zajac, E. J., & Shortell, S. M. (1989). Changing generic strategies: Likelihood, direction and performance implications. Strategic Management Journal, 5, 413430.

Bank Mergers Performance

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Bank Mergers Performance

Transféré par

Droits d'auteur :

Formats disponibles

+Model

JEB-5460; No. of Pages 19

Journal of Economics and Business xxx (2007) xxxxxx

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Fig. 1. Mergers and acquisitions in the EU banking sector.

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Sources: Bankscope and Thomson Financial Deals.

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

0.003 (0.0017) 6.474* (0.2827) 0.488 123.120

It is useful to include time dummy variables to account for idiosyncratic heterogeneity.

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

20.523* (1.621) 0.745 451.44

0.004 (0.0014) 13.541* (2.053) 0.791 254.55

49.579* (3.739) 0.845 256.36

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

1 0.08 0.06 0.17 0.19 0.33* 0.30* 0.16 0.08 0.22

1 0.21 0.17 0.28** 0.11 0.12 0.01 0.04 0.11

1 0.49* 0.31* 0.42* 0.13 0.05 0.22 0.14

1 0.39* 0.08 0.06 0.08 0.28* 0.02

1 0.17 0.21 0.01 0.53* 0.31*

1 0.25* 0.11 0.09 0.16

1 0.11 0.15 0.54

1 0.10 0.01 0.05 0.01 0.02 0.13* 0.10 0.5 0.02

1 0.01 0.16* 0.21* 0.00 0.13* 0.02 0.9 0.09

1 0.09 0.32* 0.12* 0.05 0.02 0.16* 0.46*

1 0.03 0.05 0.22* 0.00 0.08 0.17*

1 0.19* 0.15* 0.01 0.42* 0.57*

1 0.12* 0.01 0.17* 0.09

1 0.01 0.1* 0.34*

Note: *Signicant at 10% level or less.

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

152,683 18 1,135 2 20 73 0 1,372 370 0 40

221 0 26,050 3,992 1,208 53,271 0 2,758

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

JEB-5460; No. of Pages 19

Y. Altunba, D. Marqu s / Journal of Economics and Business xxx (2007) xxxxxx s e

Vous aimerez peut-être aussi