The reaction by industry insiders to M&As in the European financial industry

Serie: Documentos de Trabajo. 0713.

Autor: José Manuel Campa e Ignacio Hernando.

Temas: Competitividad | Finanzas empresariales | Mercados financieros | Unión Europea | Sectores productivos.

Documento completo

The reaction by industry insiders to M&As in the European financial industry (444 KB)

Resumen

This paper looks at the reaction by industry insiders, industry analysts and competing firms, to the announcement of M&As that took place in the European Union financial industry in the period 1998-2006. Analysts covering firms involved in an M&A transaction do not significantly alter their recommendation. This is consistent with the hypothesis that the transaction on average is "fairly priced" and that stock market prices reflect all relevant information on the assets. We also find that the correlation between excess returns for merging and competing firms is positive and, in some cases, significantly higher for domestic mergers than for international deals. This is consistent with the idea that domestic deals are more likely to have a negative impact on industry competition.