Thursday, July 29, 2010
Comparison of Merger Impact on the Profitability Measures of EU Domestic & Cross Border Bank Acquirers
Posted by D. Daniel Sokol
Matthias Nnadi, Coventry University and Sailesh Tanna, Coventry University - Department of Economics have anj empirical paper on Comparison of Merger Impact on the Profitability Measures of EU Domestic & Cross Border Bank Acquirers.
ABSTRACT: The study compares the M&A effect on the profitability measures of 63 completed EU banks. The cumulative total standardised abnormal return (CTSAR), which is a proxy for M&A and a long window of 60 days, were used to capture the impact and trends in the profitability of both acquirers. The profitability measures were hierarchically regressed against the CTSAR of the cross border and domestic banks acquirers. We found that M&A significantly reduces the profitability of the cross border acquirers but does not have such significant impact on the financial performance of the domestic acquirers. However, increase in the profitability of both acquirers reduces the cost efficiency (CER) of the banks and increases their exposure to risky lending.