M&A Operations and Performance in Banking (original) (raw)

2009, Journal of Financial Services Research

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 analyse whether M&A operations are reflected in improved performance (measured 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 to a slight deterioration in return on equity, cash flow return and profit efficiency and contemporaneously to a marked improvement in cost efficiency. Hence, the improvements in cost efficiency appear to be transferred to bank clients. These changes in (cost and profit) efficiency are directly determined by the M&A operations, and would not have occurred in the absence of any M&A operation. 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. JEL classification code: G21, G34

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