Post-acquisition performance of European cross-border bank M&As

Abstract

The banking industry has been alleged to be at the epicentre of mergers and acquisitions (M&As) for several decades. Though the short–term wealth effects of M&As have been extensively explored in the last decades, the long–term share price and operating performance is relatively under–researched. The current study attempts to investigate the post–event share price behaviour of a sample of acquiring firms involved in cross–border bank mergers. Using financial ratios, we also probe into the long–term operating performance of acquiring firms up to five years following the acquisition. The results show that acquiring firms experience a gradual positive price reversal up to two years subsequent to mergers. In addition, the financial performance seems to be improved in parallel to the market value. We conclude that cross–border bank mergers seem partially to benefit the acquiring firms in the long–term when synergistic gains from consolidation come to reality.