Operating Performance of European Bank Mergers

Ismail, Ahmad, Davidson, Ian and Frank, Regina (2009) Operating Performance of European Bank Mergers. Service Industries Journal, 29 (3). pp. 345-366. ISSN 0264-2069

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Abstract

With very few exceptions the accepted viewpoint established by (predominantly) US research is that bank operating performance is not improved after merger. In this article we concentrate on European banks and investigate post-merger operating performance for 35 publicly listed bank mergers that were completed between 1992 and 1997. We find that industry-adjusted mean cash flow return did not significantly change after merger but stayed positive. We also find that the merger led to a significant decrease in profitability and capitalisation. Our key finding, in contrast to the US evidence, is that cost-efficiency ratios improved, although the improvement was not large enough to offset the profitability decrease. We also find that low profitability levels, conservative credit policies and good cost-efficiency status before merger are the main determinants of industry-adjusted cash flow returns and provide the source for improving these returns after merger.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Depositing User: Ian Davidson
Date Deposited: 06 Feb 2012 19:54
Last Modified: 10 Oct 2012 08:34
URI: http://sro.sussex.ac.uk/id/eprint/22874
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