Domestic and cross-border returns to bidders in acquisitions into the E.U

Abstract

The article analyses shareholders returns of acquiring banks in the United Kingdom (U.K.) i.e., when U.K. banks acquire domestic banks and when U.K. banks acquire cross-border banks within the European Union (E.U.). The article includes 75% sample of the total population of bank to bank domestic acquisitions within the U.K. and cross-border acquisitions within the E.U. from 2006 until 2013. The article comes to the conclusion, by the means of event study methodology, that the shareholders returns of acquiring banks are negative and statistically insignificant (–2.076%) when they acquire cross-border banks. The results of U.K. banks acquiring domestic banks indicates higher and statistically significant abnormal returns of 1.628% at 5% significance level as compared to cross-border returns gained by U.K. acquiring banks. The research found an overall insignificant abnormal return of –0.448% for shareholders of the acquiring banks for the entire portfolio. It can be concluded that, on average, shareholders of the acquiring banks experience negative abnormal returns and acquisitions do create (short-term) abnormal returns for the acquiring banks’ shareholders around the acquisition announcement time.