| The merger wave of the 1990s has sparked a renewed interest in the mechanics, determinants and consequences of consolidation in the financial sector. On the domestic level, the groundwork for such research has been established through an extensive body of research on the major forces behind corporate mergers, and on the main post-acquisition effects concerning profitability, efficiency and shareholder wealth. It is the latter effect that is the focus of this study. More specifically, in this study, we attempt to answer the following question: what is the effect of cross-border mergers and acquisitions on shareholder wealth in the banking industry?; To this end, our empirical analysis is based on an event study methodology using a sample of cross-border mergers and acquisitions involving commercial banks and bank holding companies. Having taken into consideration a number of sampling criteria and methodological constraints, we analyze the wealth effects of consolidations to acquirers, targets and both parties combined. Special attention is paid to the problem of Beta-shifting and to the effect of market index selection on the estimation of abnormal returns.; The empirical findings of our study show that in the case of cross-border mergers and acquisitions: (i) there is weak evidence that shareholders of acquiring banks endure market-adjusted losses; (ii) there is strong evidence that shareholders of target banks receive highly significant gains; and (iii) there is sufficient evidence that the combined wealth of the merging firms' shareholders increases as a result of the acquisition announcement. |
