Bidders, Rivals, and Wealth Creation of the Banking Market Consolidation in the Asia-Pacific Region

Abstract

We analyze the shareholder wealth implications of the financial sector consolidation in the Asia-Pacific region between 1995 and 2013. The results suggest that market power consideration play a prominent role when capital market participants value M&As between Asian financial institutions. Asian bidders achieve highly significant positive shareholder wealth effects, while their non-Asian peers obtain insignificant returns. Targets of non-Asian bidders earn significantly higher returns than targets of Asian bidders. At the same time, target rivals also stand to gain from further consolidation in the market. Overall, Asian bidders and their rivals profit from consolidation, particularly on the national level, suggesting that market power considerations may be a dominant motivation behind these mergers.