Diversification versus Specialisation: An Event Study of M&As in the European Banking Industry

International audienceThis study examines the stock market valuation in terms of expected gains of mergers and acquisitions (M&As) amongst banks that were announced from 1991 to 2001 in 13 European markets. We classify M&As according to activity, geographic specialisation or diversification. A Bivariate GARCH model is used to estimate abnormal returns taking beta variability into account. Our results document that there is, on average, a positive and significant increase in value for the group of targets' banks. Moreover, we find that on average there is a positive and significant market reaction for the two types of transactions: cross-product diversification and geographic specialisation