Impact of the Financial Crisis on Banking Acquisitions: A Look at Shareholder Wealth

Abstract

This paper examines the influence of the 2007-08 financial crisis on value creation for acquirer's shareholders in the banking industry using a sample of 883 deals over 2004-12. Applying an exploratory and top-down approach, banking acquisitions are considered at the global level, narrowing the analysis step by step to consider domestic versus cross-border acquisitions. Then cross-border deals are split based on the economic development of the acquirer and target countries. It is observed that only acquisitions involving emerging-economy acquirers and developed-economy targets generate positive and significant returns to shareholders after the crisis. Major changes in the global acquisition landscape are also observed since 2007, with emerging-economy banks increasing their acquisition activity, both nationally and internationally.

Long-term performance of mergers and acquisitions in ASEAN countries

“…Also, recent studies have shown that the turbulences in the business environment can have a significant impact on bidder's returns (Beltratti & Paladino, 2013;Rao-Nicholson & Salaber, 2014a, 2014b, 2015Wan & Yiu, 2009). Thus, it is interesting to look at the impact of the 2007-2008 financial crisis on the OP of M&As in ASEAN.…”

A Comparative Abnormal Return Analysis of Mergers and Acquisitions in the Emerging Markets

“…[2] suggests that M&A activities are not closely related to the business cycle but the state of the economy. In other words, if economy is in a good condition, stock markets have desired conditions for the firms to raise capital and grow their profitability [3]. On the other hand, in the opposite situation, that is, if economy is in a narrow condition, firms tend to be more conservative about M&A.…”

“…Abnormal returns precrisis and postcrisis period was not significantly different from zero. In another research, [3] examined 883 cross-border M&A deals in banking sector between 2004 and 2012. They concluded that only in M&As from emerging countries targeting developed countries, returns of the shareholders were significantly positive after the crisis.…”

“…There is a broad literature about generating abnormal returns 3 through M&As. However, there are not many studies in investigating the abnormal returns during 2007-2008 crisis.…”

“…Banks in emerging economies such as China, Brazil and Russia acquired undervalued banks in developed countries as their prices in the stock markets fell [3]. Banks that are in healthy conditions in terms of capital and liquidity took the advantage of increasing their market share through M&As [6].…”