Diversification versus Specialisation: An Event Study of M&As in the European Banking Industry

Laetitia Lepetit (1) , Stéphanie Patry (1) , Philippe Rous (1)

1 LAPE - Laboratoire d'Analyse et de Prospective Economique

This study examines the stock market valuation in terms of expected gains of mergers and acquisitions (M&As) amongst banks that were announced from 1991 to 2001 in 13 European markets. We classify M&As according to activity, geographic specialisation or diversification. A Bivariate GARCH model is used to estimate abnormal returns taking beta variability into account. Our results document that there is, on average, a positive and significant increase in value for the group of targets' banks. Moreover, we find that on average there is a positive and significant market reaction for the two types of transactions: cross-product diversification and geographic specialisation.

Mots clés: European Banks Mergers and Acquisitions; Bivariate GARCH; Abnormal Returns

Domaines: Economies et finances

Laetitia Lepetit, Stéphanie Patry, Philippe Rous. Diversification versus Specialisation: An Event Study of M&As in the European Banking Industry. Applied Financial Economics, 2004, 14 (9), pp.663-669. ⟨10.1080/0960310042000233430⟩. ⟨hal-00804954⟩