The impact of mergers and acquisitions on shareholders' value : an empirical analysis of European banks.

Abstract

Mergers and Acquisitions (M&A) are taken into account as some of the most usable practices for firm development and expansion. These practices have commonly been utilized in European countries while are often used. This research directs to examine the effect of M&A on stock wealth of banking industry in Europe by using event study analysis for the period of 2007–2016, regarding 114 deals. Market Model was used to calculate the abnormal and cumulative abnormal returns for analyzing the three event periods and the impact of the transaction in stock performance. The research disclose composite findings regarding mergers and acquisitions and their stock prices performance. Our results shown that most of the companies performed negative abnormal returns while some others have produced positive abnormal and cumulative abnormal returns after transaction period. All in all, the results indicate that the market make a positive response towards M&A transactions in banking sector of Europe. Especially, shareholders of target firms earn positive abnormal returns, after the announcement. The findings would be beneficial in supplying awareness to the investors and management regarding their investment decisions.