The consequences of mergers on the profitability of Spanish savings banks (original) (raw)
Related papers
The effect of mergers and acquisitions on productivity: An empirical application to Spanish banking
Omega-international Journal of Management Science, 2010
Mergers and acquisitions are frequently justified in terms of value creation or efficiency improvements. Nevertheless, the evidence is not consistent with the existence of benefits in terms of the costs, productivity, profitability or market value of the firms involved. A distinguishing feature of extant research is that it focuses on the assessment of the consequences of mergers around the time in which the operation takes place, limiting the possibility of observing a complete integration between the merged firms. In this context, the objective of this paper is to evaluate the effects of mergers and acquisitions on the long-run productivity of Spanish savings banks. Our results show that productivity improvements can be found in only half of the mergers that take place during the period analyzed.
Mergers and Acquisitions in the Spanish Banking Industry: some Empirical Evidence
1999
Since the late eighties, the Spanish banking system has been undergoing major changes that have affected both its structure and the nature of strategic interaction among banking institutions. Various different strategies have been adopted to tackle the demands of this new operating environment, one such strategy having been consolidation via mergers and acquisitions. This paper attempts to provide some empirical evidence on the impact of the consolidation process on the monetary transmission mechanism, the degree of competition in banking markets and the performance of banking institutions.
The long run consequences of M&A: An empirical application
Mergers and acquisitions are frequently justified in terms of value creation or efficiency improvements. Nevertheless, the evidence is not consistent with the existence of benefits in terms of the costs, productivity, profitability or market value of the firms involved. A distinguishing feature of extant research is that it focuses on the assessment of the consequences of mergers around the time in which the operation takes place, limiting the possibility of observing a complete integration between the merged firms. In this context, the objective of this paper is to evaluate the effects of mergers and acquisitions on the long-run productivity of Spanish Savings Banks. Our results show that productivity improvements are found when we consider a long observation window.
THE IMPACTS OF BANK MERGERS AND ACQUISITIONS (M&As) ON BANK BEHAVIOUR
This thesis examines the impact of bank mergers and acquisitions (M&As) on lending behaviour by commercial banks. We use the data set of large European commercial banks from 1997 to 2005. Empirical models are formulated to explain the effects of mergers on bank loan pricing behaviour, interest margin setting, credit availability and lending objectives. The analysis provides evidence that mergers have statistically significant influence on reduced lending rates, interest margins and loan supply. In addition, lending objectives for merged and non-merging banks are different, in that merge-involved banks tend to emphasise maximising their utility, while non-merging banks focus on remaining safe. These results suggest that merged banks can obtain efficiency gains through mergers and can pass these benefits to their customers in the form of lower lending rates and interest margins. In addition, diversification gains could arise from consolidations. This is because merged banks focus more on other business activities than traditional intermediary activities. As non-interest income increases in relation to interest income, banks can diversify their business activities and can reduce their non-interest costs. As a result, they can be exposed to lower risk and therefore be less risk averse than non-merging banks.
This study investigates the merger effects of two banks. The merger took place in mid 1999s and the effect was the Alpha Bank. The research is performed in two parts. The first part investigates the merger in the short-term, while the second part investigates the long-term effects of the merger exploring the relative position of the Alpha bank within the industry. Results show a beta-risk value for the Alpha bank which is a reconciliation of the beta-risks coefficients of the two banks, and moreover, reveal that Alpha bank is not only profitable but also competitive within the industry.
On the Performance of Banking Mergers. Some Propositions and Policy Implications
The Impact of Mergers and Acquisitions in Finance on …, 2000
Using both ex ante and ex post methodologies, this paper discusses the performance of mergers in banking. The discussion is set against a more general background and concludes that it is unlikely that mergers among large banks, as well as take-overs of small banks by large banks, are able to create much economic wealth. Also, it is found that such mergers and take-overs do not generally create positive shareholder returns. The generality of this finding is demonstrated by a discussion of findings on non-financial mergers. Since the ubiquitousness of ill-performing mergers is at odds with both conventional wisdom and economic theory, the paper discusses briefly why then such mergers and take-overs take place at all. It is suggested that especially large banks may be incapable of checking value-destroying strategies because of the incidence of so-called minimax-regret behaviour both among their large clients and among themselves. The paper touches upon some wider effects on economic efficiency and comes up with several policy implications. It is argued that competition policies should address issues of productive efficiency along with issues of allocative efficiency and that industrial policies should improve the access of retail clients to investment funds.
Long-term Performance of Acquirers Involved in Domestic Bank Ms&As in Europe
International Journal of Financial Research, 2014
The consolidation process in the European banking system has been particularly strong in the last two decades. This paper investigates the long-term impact of M&As in the profitability and efficiency of banks. Using a sample of 118 within-border deals in Europe over the period 1996-2010, we highlight features of performance by the use of standard profitability and loan quality ratios. Our results show that in the post-merger period profitability slightly increases after the third year of operation even though initially M&A activity influences negatively our employed measures. Evidence from efficiency ratios is mixed. Some empirical evidence allows us to detect expansionary policies by banking institutions two to three years after the M&A onwards, but results have no definite trend. Over longer time horizons it is clear that banks' loan loss provisions against non-performing loans plummet in a finding related to information sharing in domestic deals. When testing the stock price behavior of merged institutions our empirical evidence does not allow us to infer that there exist opportunities to reap profits throughout the 2-year post-merger horizon.
MERGERS AND ACQUISITIONS IN THE GREEK BANKING SECTOR ADDRESSING THE PROFITABILITY QUESTION
The wave of mergers and acquisitions of financial institutions which was observed in the United States and Europe in the 1980s and 1990s seems to have affected the Greek banking market by the end of the 1990s. The result was the emergence of new significant players in the market. Despite the fact that scale economies should lead to the improvement of their efficiency, this fact was not confirmed by empirical research and, moreover in several cases there has been an adverse effect. We are focus on financial statement analysis by examining the profitability and performance ratios. Mergers and acquisitions in the Greek banking system contributed to an increase in profitability of banks but they did not lead to improvement to their efficiency. It is an undeniable fact that the development and expansion of banks had a positive effect on the markets, resulting in the attraction of new capital which improved their capital sufficiency and of course on their extroversion, their internationalization and their successful expansion to other markets-particularly to Balkan countries.
2017
The last two decades since the early 1990s were characterised by important factors that influenced the banking institutions in the EU – introduction of the euro, globalisation, deregulation and technological advance. The speed and depth of these changes were unprecedented. For many European banks, mergers and acquisitions (M&A’s) became a universal response to these trends. Consequently, the number of operating banks has been continuously decreasing since the early 1990s due to integration processes. However, the influence of the above-mentioned factors was studied insufficiently in the existing literature, and the obtained results were mixed and inconclusive. The thesis attempts to add to the knowledge on M&A’s and to determine the impact of external shocks in relation to the banking acquisitions in the European Union. The thesis re-evaluates and investigates the role of the introduction of the euro in the post-merger outcomes in the European banking sector. Following the methodolo...
Estimating the impact of bank mergers: an application to the Portuguese banking system
2011
Most studies assessing the impact of bank mergers analyze the differential impact of these processes on a number of variables that characterize the banking system. However, this approach has important limitations, ignoring endogenous changes in market structure that might occur after the merger. This article analyzes the impact on credit markets of a number of bank mergers in the Portuguese banking system using this methodology usually employed in the literature, as well as an alternative methodology based on the estimation of a structural model, which allows for the derivation of a counterfactual scenario. In this framework it becomes possible to evaluate, using this structural model, what would have happened if the mergers had not occurred. We fi nd that these mergers have contributed to a decrease in loan interest rates larger than what could have been anticipated. The fl ow of credit to non fi nancial fi rms was larger than what was suggested by the combination of the pre-merger equilibrium with the post-merger environment. In contrast, the fl ow of loans to households was lower than expected, even though the loans granted to this sector have recorded a signifi cant growth during the period analysed.