Mergers and Acquisitions (abbreviated M&A) within the European financial market have altered the European banking sector drastically in the past couple of decades. Walkner & Raes (2005) claim that cross-border M&As have not been a major feature of the EU banking sector, implying that domestic bank mergers dominated the merger process for a long time.
From 1995 to 2006, the number of credit institutions decreased on average my approximately 7% in the eurozone, which was mainly driven by domestic merges.
However, since the mid of the 1990s cross-border M&As gained momentum and play a significant role in the European banking consolidation process. Nevertheless, “cross-border M&A has never come close to exceeding domestic mergers and acquisitions” (Kleimeier et al., 2007).
Despite the high level of M&A activity in Europe, relatively little research has been conducted dealing with cross-border M&As. Most of prior research applies event study methodology in order to analyze announcement effects of European bank M&As. Further, these studies focus on the question whether bank M&As in Europe have created or destroyed shareholder value. Others try to provide an in depth analysis of the factors that affect and may explain the value creation process. Altunbas et al. (2007) or Beitel et al. (2003) try to explain the M&A success in European bank mergers. However, the results often lack explanatory power.
Therefore, this thesis looks at the success of cross-border M&A from a different perspective.
The paper aims at understanding whether or not culture plays an important role in the success of M&As. Consequently, the study tries to identify cultural characteristics of bidder and targets, which have explanatory power for bidder returns and the combined effect of both bidder and target.
The thesis has several unique features. First, the study conducts an extensive short-term and long-term analysis on cross-border M&As. Second, the results of the event studies are tested by employing accounting studies as well. Third, the thesis provides a real life example of the merger between UniCredit and HypoVereinsbank.
This thesis is the first one, which extensively analyzes the following research question:
Are cross-border M&As of cultural similar countries more successful?
Table of Contents
1. Introduction
1.1 Background and Problem Definition
1.2 Structure
2. Theoretical Background
2.1 Mergers & Acquisitions
2.1.1 Description
2.1.2 Terminology of M&A transactions
2.1.3 Motivations for M&A
2.2 Definition of M&A success
2.2.1 Measuring success in bank related M&A transactions
2.2.1.1 Event Studies
2.2.1.2 Accounting Studies
2.3 Factors influencing M&A success in banking transactions
2.4 M&A transactions in the European Banking Sector
2.4.1 Financial Consolidation in the European Banking Sector
2.4.2 Barriers for European Transactions
2.4.2.1 Legal and Regulatory Barriers
2.4.2.2 Political and Cultural Barriers
2.4.2.3 Other barriers
2.4.3 Drivers of the financial consolidation
2.4.3.1 Globalisation
2.4.3.2 Technological Change
2.4.3.3 Regulatory Reform
2.4.3.4 Industrial Driver
3. Research Hypotheses
4. Empirical Analysis
4.1 Data Sample
4.1.1 Selection Process
4.1.2 Annotation to the selected Data Sample
4.2 Sample Statistics
4.3 Short-term performance
4.3.1 Methodology - Event Study Approach
4.3.2 Test for Statistical Significance
4.3.2.1 T-Test
4.3.2.2 Standardized-Residual Test
4.3.2.3 Boehmer Test
4.3.2.4 T-Test for Differences
4.4 Long-term Performance
4.4.1 Cumulative abnormal return approach
4.4.2 Buy-and-hold abnormal return approach
4.4.3 Calendar-time portfolio approach
4.4.4 Significance Test
4.5 Explanatory Variables
4.5.1 Country Characteristics
4.5.2 Hofstede’s Dimensions
4.5.3 Governance Indicators
4.5.4 Religious Characteristics
4.5.5 Control Variables
5. Empirical Results
5.1 Univariate Analyses and Results (Short-term Performance)
5.1.1 Full Sample Analysis
5.1.2 Sub-Sample Analysis for Bidding Bank
5.1.2.1 Hypothesis 1
5.1.2.2 Hypothesis 2
5.1.2.3 Hypothesis 3
5.1.2.4 Hypothesis 4
5.1.2.5 Hypothesis 5
5.1.2.6 Hypothesis 6
5.1.2.7 Hypothesis 7
5.1.3 Sub-Sample Analysis for Combined Banks
5.1.4 Robustness Check
5.2 Multivariate Regression Analysis
5.2.1 Results
5.3 Long-term-performance
5.3.1 Results of Buy-and-Hold Approach
5.3.2 Results of Calendar-Time Portfolio Approach
5.4 Accounting Study
5.4.1 Reasons for Accounting Study
5.4.2 Methodology
5.4.3 Data Sources
5.4.4 Results
5.5 Summary of the Results
6. Case Study
6.1 National Culture
6.2 The Merging Parties
6.3 Quantitative Results
7. Conclusion
7.1 Summary of the Results
7.2 Limitations
Research Objectives and Themes
This thesis examines the impact of cultural similarity on the success of cross-border mergers and acquisitions (M&A) within the European banking sector. The primary research question is whether bank mergers between countries that are culturally similar perform better than those between culturally dissimilar nations, utilizing both short-term market reactions and long-term accounting performance data.
- Analysis of short-term abnormal stock market returns using event study methodology.
- Evaluation of long-term post-merger accounting performance changes.
- Testing of 15 cultural and governance variables, including Hofstede’s dimensions and World Governance Indicators.
- Case study of the UniCredit and HypoVereinsbank merger to provide practical insights.
Excerpt from the Book
2.1.1 Description
Over the past decade, M&A have reached unprecedented levels in the banking sector, as banks use corporate financing strategies to maximize shareholder value and create a competitive advantage (Bruner et al, 2004).
Despite the frequent use of the term mergers and acquisitions a consistent as well as uniform comprehension of the term does not exist and therefore, a definition will be provided. Basically, the phrase mergers and acquisitions comprises “aspects of corporate strategy, corporate finance as well as of management, dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity” (Cooper et al, 2006).Generally, acquisitions occur when a large company takes over a small one. Further, throughout the working paper, the acquisition is used when one company acquires a majority interest in another company. A merger typically involves two relative equals joining forces and creating a new company. Weston et al. (1990) defines mergers and acquisitions as “any transaction that forms one economic unit from two or more previous ones.”
Most mergers and acquisitions should be considered friendly, but a hostile takeover occurs when the acquirer bypasses the board of the targeted company and purchases a majority of the company’s stock on the open market.
Summary of Chapters
1. Introduction: Introduces the research context regarding European bank mergers and presents the core research question.
2. Theoretical Background: Provides foundational knowledge on M&A typologies, definitions of success, and the specific drivers of consolidation in the European banking sector.
3. Research Hypotheses: Develops seven specific hypotheses testing the relationship between cultural, legal, and religious variables and M&A performance.
4. Empirical Analysis: Describes the data selection criteria, sample characteristics, and the statistical methodologies (event studies and long-term performance models) utilized.
5. Empirical Results: Reports the univariate and multivariate findings for both short-term market performance and long-term accounting metrics.
6. Case Study: Applies the theoretical findings to the specific merger of UniCredit and HypoVereinsbank to illustrate cultural challenges in practice.
7. Conclusion: Summarizes the key findings and discusses the study's limitations.
Keywords
Mergers and Acquisitions, M&A, European Banking Sector, Cross-border M&A, Cultural Similarity, Shareholder Value, Event Study, Accounting Performance, Hofstede, Governance Indicators, Bank Consolidation, Unicredit, HypoVereinsbank, Financial Integration, Market Efficiency.
Frequently Asked Questions
What is the core subject of this thesis?
The thesis investigates the relationship between cultural similarity between countries and the success of cross-border mergers and acquisitions within the European banking sector.
What are the central thematic areas covered?
The research focuses on banking M&A trends, the influence of national culture and legal systems on deal performance, and the comparison of short-term market reactions versus long-term financial outcomes.
What is the primary research question?
The study specifically asks: "Are cross-border bank mergers of culturally similar countries more successful?"
Which scientific methods are employed?
The author uses a two-pronged quantitative approach: Event Study methodology to assess short-term shareholder value and Accounting Studies to evaluate long-term profitability and performance changes.
What content is included in the main section?
The main part covers the theoretical framework, the formulation of hypotheses, a detailed description of the empirical data sample (covering 88 transactions), and an extensive statistical analysis including univariate and multivariate regression.
Which keywords characterize the work?
Key terms include Mergers and Acquisitions, European Banking Sector, Cultural Similarity, Event Study, Accounting Performance, and Financial Integration.
How does the case study complement the statistical analysis?
The case study of the UniCredit and HypoVereinsbank merger provides a qualitative, "real-life" perspective that illustrates how abstract cultural dimensions, such as "competence-thinking" versus "hierarchy-thinking," actually affect integration processes.
What is the conclusion regarding cultural similarity and M&A success?
The thesis concludes that there is no consistent evidence that mergers between culturally similar countries are more successful; in many cases, cultural similarity does not significantly improve post-merger performance.
- Quote paper
- Johannes Weigl (Author), 2008, Empirical Evidence on cross-border M&A in the European Banking Sector, Munich, GRIN Verlag, https://www.grin.com/document/196538
