Shareholder wealth effects of bank mergers and acquisitions in Latin America

Abstract

Purpose

The purpose of this paper is to analyze the short‐ and long‐term wealth effects of domestic and cross‐border acquisition announcements of banks in Latin American.

Design/methodology/approach

This study uses the event study methodology to investigate the short‐term wealth effects of 94 bidding and 24 target banks between 1995 and 2011. Additionally, a buy‐and‐hold abnormal return analysis of 91 acquiring institutions is conducted to study the long‐term wealth effects and a cross‐sectional regression analysis identifies some key drivers of successful M&As.

Findings

This paper provides evidence of significant positive stock market reactions for bidders and targets. These results may indicate that in contrast to prior empirical findings in less dynamic banking markets, Latin America is still a region of attractive consolidation conditions.

Research limitations/implications

Since data was not available for all Latin America countries, the results may lack generalizability. Therefore, researchers are encouraged to use an expanded data set to further test the empirical results of this paper.

Practical implications

Especially in light of the positive long‐term stock performance, bank mergers and acquisitions in Latin America should not simply be seen as a short‐term investment but rather as a long‐term commitment.

Originality/value

To the best knowledge of the authors, this is the first paper to provide an integrated analysis of the short‐ and long‐term wealth effects of bank M&As in Latin America.

Citation

Kolaric, S. and Schiereck, D. (2013), "Shareholder wealth effects of bank mergers and acquisitions in Latin America", Management Research, Vol. 11 No. 2, pp. 157-177. https://doi.org/10.1108/MRJIAM-Feb-2012-0473