Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves
ABSTRACT The aim of this study is to investigate the stock market’s reaction to bank merger and acquisition (M&A) events in Brazil when the market is heated. This article aims to fill the research gap involving bank M&As and their effects, especially those arising from M&A waves. This fi...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Universidade de São Paulo
2019-02-01
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| Series: | Revista Contabilidade & Finanças |
| Subjects: | |
| Online Access: | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772019000200234&lng=en&tlng=en |
| _version_ | 1819049947345977344 |
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| author | João Gabriel de Moraes Souza Ivan Ricardo Gartner |
| author_facet | João Gabriel de Moraes Souza Ivan Ricardo Gartner |
| author_sort | João Gabriel de Moraes Souza |
| collection | DOAJ |
| description | ABSTRACT The aim of this study is to investigate the stock market’s reaction to bank merger and acquisition (M&A) events in Brazil when the market is heated. This article aims to fill the research gap involving bank M&As and their effects, especially those arising from M&A waves. This field remains open in the literature; there is no consensus as to the abnormal returns the investor can expect from this mechanism. The notion that bank M&A markets heat up is discussed and still does not present a consensus in the literature. Therefore, topics that involve research on specific M&A strategies and their effects are interesting for the literature. The results of this research point to the emergence of positive cumulative abnormal returns for rivals of newly-merged acquiring banks and zero ones for acquired banks. This analysis occurs because in heated markets the probability of rival banks becoming involved in M&As increases, leading to market gains and greater market power for acquiring banks and the rapid pricing of acquired bank assets. This result corroborates with the post-merger analysis, in which the accounting performance indicators of the acquiring banks are positive. The market reaction was verified through the use of the event study econometric technique, which was applied in the investigation of the occurrence of abnormal returns in time windows of up to 41 days around the bank M&A events. The study measured the stock market’s reaction to a motivation for M&As, which is the effect of M&A waves. This article contributes to the literature by highlighting specific forms of bank M&As. In particular, the logic of merger by market forces is addressed. This mechanism of mergers by market forces is presented as evidence of the tendency for M&As and not of paid-in earnings. |
| first_indexed | 2024-12-21T11:40:15Z |
| format | Article |
| id | doaj.art-82b9b27d7e674dab924c2fe22f79a9eb |
| institution | Directory Open Access Journal |
| issn | 1808-057X |
| language | English |
| last_indexed | 2024-12-21T11:40:15Z |
| publishDate | 2019-02-01 |
| publisher | Universidade de São Paulo |
| record_format | Article |
| series | Revista Contabilidade & Finanças |
| spelling | doaj.art-82b9b27d7e674dab924c2fe22f79a9eb2022-12-21T19:05:19ZengUniversidade de São PauloRevista Contabilidade & Finanças1808-057X2019-02-01308023425110.1590/1808-057x201806320S1519-70772019000200234Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market wavesJoão Gabriel de Moraes SouzaIvan Ricardo GartnerABSTRACT The aim of this study is to investigate the stock market’s reaction to bank merger and acquisition (M&A) events in Brazil when the market is heated. This article aims to fill the research gap involving bank M&As and their effects, especially those arising from M&A waves. This field remains open in the literature; there is no consensus as to the abnormal returns the investor can expect from this mechanism. The notion that bank M&A markets heat up is discussed and still does not present a consensus in the literature. Therefore, topics that involve research on specific M&A strategies and their effects are interesting for the literature. The results of this research point to the emergence of positive cumulative abnormal returns for rivals of newly-merged acquiring banks and zero ones for acquired banks. This analysis occurs because in heated markets the probability of rival banks becoming involved in M&As increases, leading to market gains and greater market power for acquiring banks and the rapid pricing of acquired bank assets. This result corroborates with the post-merger analysis, in which the accounting performance indicators of the acquiring banks are positive. The market reaction was verified through the use of the event study econometric technique, which was applied in the investigation of the occurrence of abnormal returns in time windows of up to 41 days around the bank M&A events. The study measured the stock market’s reaction to a motivation for M&As, which is the effect of M&A waves. This article contributes to the literature by highlighting specific forms of bank M&As. In particular, the logic of merger by market forces is addressed. This mechanism of mergers by market forces is presented as evidence of the tendency for M&As and not of paid-in earnings.http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772019000200234&lng=en&tlng=enfusões e aquisiçõesbancosmercados aquecidosestudo de eventosregressão quantílica |
| spellingShingle | João Gabriel de Moraes Souza Ivan Ricardo Gartner Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves Revista Contabilidade & Finanças fusões e aquisições bancos mercados aquecidos estudo de eventos regressão quantílica |
| title | Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves |
| title_full | Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves |
| title_fullStr | Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves |
| title_full_unstemmed | Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves |
| title_short | Market reaction to bank merger and acquisition events in Brazil: an analysis of the effects of market waves |
| title_sort | market reaction to bank merger and acquisition events in brazil an analysis of the effects of market waves |
| topic | fusões e aquisições bancos mercados aquecidos estudo de eventos regressão quantílica |
| url | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772019000200234&lng=en&tlng=en |
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