Financial institutions mergers: a strategy choice of wealth maximisation and economic value

Mohamad Hassan, Evangelos Giouvris

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Abstract

This study examines the short and long horizons wealth maximisation effect of financial institutions mergers, and their determinants in the pre- and post-merger periods. Results show that FIs mergers destroy share value for the bidding firms pursuing a Market penetration strategy. FIs are advised to pursue Market Development and Product Development strategies because they enable shareholders’ value creation in short and the long horizons. Local bank to bank mergers create shareholders value and enhance liquidity and economic value in the short run. Bank to Bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks. Shareholders value drives long-run economic value for North American banks, but it is adversely affected by credit risk appetite in Australasian bank focused mergers.
Original languageEnglish
JournalJournal of Financial Economic Policy
DOIs
Publication statusPublished - 5 Dec 2019

Keywords

  • Shareholder Value
  • Financial crisis impact
  • Ring-fencing
  • Diversification Strategies
  • Economic Value Addition
  • Event Study and Buy and Hold methods

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