Year-end Sale % OFF 
Abstract
Objective – Analyze the reactions of the stock market to M&A announcements, i.e. find out if there was value creation and consequently maximization of shareholder wealth or whether there was value destruction and consequently a decrease in the wealth of the shareholders of the acquiring companies in the short term. Design/methodology/approach – Event study – Quantitative Method Findings – It can neither be affirmed that the acquisitions had a significant impact on value creation for purchasers and banks, nor can it be denied. Given the lack of preponderance of either positive or negative returns, the transactions may have been perceived in different manners. Practical implications – The results may be explained by the fact that the synergies that resulted from the M&A processes in the banking sector only helped consolidating major market players and consequently reduced competitiveness in that sector. The negative abnormal returns of M&A processes are due to the monopolistic market competition structure (Tabak, Fazio & Cajueiro, 2012). Contributions – Event Study with robust errors
Highlights
Camargos and Barbosa (2008) evaluated 72 merger and acquisition operations (M&A) processes of Brazilian companies, from January 1996 to December 2004. They analyzed the impact of M&A transactions on the creation of operational synergies and on value creation for shareholders and concluded that the acquiring companies had the greater potential for value creation and for generating operating synergies when compared to the acquired companies, which shows that, in the cases analyzed, the acquisition made sense from the economic point of view
The expected rank for the day of the event is an average rank resulting from the sum of the total amount of abnormal returns (T), which varies according to the event window adopted, i.e.: in the case of -10 and +10 days, the total number of analyzed days is 71, plus one and divided by two: (8)
Regarding α=5%, Tc should be higher than +1.64 to show significant positive abnormal returns or lower than -1.64 to show negative abnormal returns in a significant way
Summary
The debate on the creation of value as a result of merger and acquisition operations (M&A) in academic literature has been inconclusive and the ambivalent and different results over time stimulate researchers to conduct further investigations. M&A activities in the banking sector have increased in large waves since the beginning of Brazil’s economic restructuring process that started after the Real Plan. Today, this sector features a high degree of concentration, similar to other Latin American countries, but quite higher than in developed countries, such as the United States (Tabak, Fazio & Cajueiro, 2012). In Brazil, financial stress was a major reason that led to the wave of consolidation of the 1990’s. The Real Plan and the subsequent normalization of inflation and interest rates stabilized the economy and this new scenario drastically changed the business model of banks, which started to increase their credit offer and rely less on revenues from treasury operations. The aim of this study is to analyze the profitability of the shares of the banks involved in mergers or acquisitions, i.e., to analyze the reactions of the stock market to M&A announcements and to find out if there was value creation and maximization of shareholder wealth, or value destruction and a decrease in the wealth of the shareholders of the acquiring companies in the short term
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