Bank acquisitions and performance: evidence from a panel of European credit entities

Abstract

The aim of our research is to study the effect on European Union credit entities performance of financial acquisitions, overcoming three limitations found in previous studies: most studies have focused on the United States market (characterised by higher regulatory restrictions for banking expansion both geographically and in products); they have not considered acquisitions of other banks as distinct from acquisitions of other non-banking financial entities; and statistical limitations have been evidenced. Our study, therefore, is the first to analyse bank performance derived from both the acquisition of another bank and the acquisition of other non-banking financial entities, using panel data methodology, for the period 1993–2000, in a sample of 1629 banks, where 181 acquisitions are noted. The results show an increase in the acquirers’ long-term profitability. The increase in performance, however, is more significant for bank acquisitions than for non-bank acquisitions.