Operating performance of European bank mergers

Ahmad Ismail, Ian Davidson, Regina Frank

    Research output: Contribution to journalArticlepeer-review

    21 Citations (Scopus)

    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.

    Original languageEnglish
    Pages (from-to)345-366
    Number of pages22
    JournalService Industries Journal
    Volume29
    Issue number3
    DOIs
    Publication statusPublished - Jan 1 2009

    Keywords

    • Bank merger
    • Cash flow
    • Operating performance

    ASJC Scopus subject areas

    • Strategy and Management
    • Management of Technology and Innovation

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