Abstract
This paper investigates the risk and wealth effects of 72 mergers and acquisitions between banks in Europe and insurance companies during the period 1989–2004. The empirical results indicate that acquirers’ total risks remain constant relative to the world, home market indices and home banking indices. There are no changes for the systematic risks (beta) with respect to the world market index or the home banking index. After removing world and home market indices effect, systematic risk against home banking index reduce significantly for domestic deals. In addition, positive wealth effects are documented. Two factors have contributed to the bidders’ cumulative abnormal returns (CARs): relative deal size and being a serial acquirer. Finally, change of beta shows negative relations with CARs.
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