Abnormal stock market returns to announcements of M&A banking deals in Greece 1996-2013

Anastasios KARAMANOS, George BAKATSELOS, Roena AGOLLI

Abstract


This study has undertaken a comprehensive empirical analysis of the wealth effects of bank M&As in Greece over the period 1996-2013. The purpose is to measure the performance of merger participants over the acquisition period as a deviation of how shareholders’ actual returns differ from expected returns conditional on the particular process of M&A. The authors develop a conceptual framework that integrates theoretical perspectives from economics, finance, organization theory, strategic management and human resource management to offer a broader process-oriented integrative model of the empirical evidence and theories suggested to explain acquisitions. The empirical analysis reports insignificant abnormal gains for acquiring banks, significant positive abnormal returns at 7,44% for acquired banks, and 2,91% positive abnormal returns for the combined entity, in the event window [-10;+1]. The findings indicate that, on average, the Greek bank mergers neither create nor destroy shareholder wealth. This result is consistent with the findings of other Greek event studies and the bulk of US and European event studies on M&A wealth effects. On average, acquired firm shareholders gain at the expense of the acquiring firm and market value of the combined entity appears to have little improvement around the announcement of the transaction. The conceptual framework explicitly describes that wealth effects of bank M&As in Greece over the period 1996-2013 may be a result of macroeconomic theory and perfectly competitive market, lack of strategic relatedness and synergy realization, managerial hubris, or unethical behavior of managers derived from expense preference approach of agency theory.


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