A study on the impact of mergers & acquisitions on shareholders’ wealth and efficiency
School of Economics, Shanghai University, Shanghai, China
As nowadays mergers & acquisitions are becoming more and more prevalent, this paper concerns the impact of mergers & acquisition on shareholders’ wealth and efficiency. Choosing mergers & acquisitions events in bank industry, we apply literature analysis to see what previous scholars have found and CAPM model to calculate their CAR, which reflects the change of shareholders’ values (positive CAR means shareholders gain positive returns from mergers & acquisitions and vice versa). And finally, we find that bank mergers and acquisitions do create shareholder wealth for the target bank acquired and that in many cases the acquiring firm’s shareholders tend to lose out because their ownership in the newly formed bank is severely diluted and the same is with the efficiency. What’s more, when we take the financial crisis into consideration, mergers are seen to be a safe haven. Besides that, senior management must be skilled at corporate restructuring within the newly merged banks for merged banks to survive post-merger activity.
Key words: mergers & acquisitions / shareholders’ wealth and efficiency / financial crisis
© Owned by the authors, published by EDP Sciences, 2016
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.