Measures of market reaction in mergers and acquisitions in Italy

Abstract

This paper presents an event study on mergers and acquisitions (M&A) between publicly listed Italian banks. Our study suggests that previous literature may have only partially captured the market reaction by choosing the announcement date as the event date. In less efficient markets the announcement date can be too late to allow the market reaction to be recorded, especially where information has been previously leaked. Using the rumour date and other event windows we can show that there is a portion of market reaction which has not been captured by previous research. Moreover, we are also able to present evidence of other characteristics affecting market reaction to M&A in the Italian banking sector.