Mergers and acquisitions in the banking sector: An empirical review of the impact of merger announcement on abnormal returns

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

This dissertation reviews and summarizes previous findings of merger announcement related abnormal returns. A sample of 183 event windows is collected and analyzed to observe cross-country differences. The results are discussed under five specific topics: location, payment method, strategic focus, size and corporate governance. The findings of this review indicate that target banks enjoy high abnormal returns both in the U.S. and in Europe. Bidding banks seem to incur negative returns on average while small value creation was observed for the merged entity. Target banks are generating higher returns in USA while bidding banks show better performance in Europe. A minor indication of decreasing U.S. bank returns is observed as the measurement period increases. Geographical and activity focus as well as use of cash as a payment method are seen to contribute to the higher abnormal returns.