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Consolidation in the financial services industry: Are there industry gains for acquisitions of security firms?

Authors :
Aigbe Akhigbe
Jeff Madura
Jarrod Johnston
Source :
Journal of Economics and Finance. 28:14-31
Publication Year :
2004
Publisher :
Springer Science and Business Media LLC, 2004.

Abstract

We examine the revaluation of target security firms, their respective acquirers, both banks and non-banks, and their corresponding rivals before and after the major consolidation wave of 1994 to 1997. We find that target security firms as well as their respective acquirers are favorably revalued at the time of their acquisitions. The valuation effects are more favorable for non-bank acquirers and for acquirers with more growth potential and a lower degree of financial leverage. This suggests that investors expect greater synergies for mergers by better capitalized, faster growing, non-bank acquirers. In contrast to previous merger studies that generally find negative wealth effects for acquiring firms, cumulative abnormal returns (CARs) are on average positive for acquirers, targets, and portfolios of competing security firms, with the highest positive CARs for targets.

Details

ISSN :
19389744 and 10550925
Volume :
28
Database :
OpenAIRE
Journal :
Journal of Economics and Finance
Accession number :
edsair.doi...........0a10a044a476d80ce95faa210f5b2ec6
Full Text :
https://doi.org/10.1007/bf02761451