Bank acquisitions and shareholder returns

This paper examines whether acquisitions in the banking sector are associated with positive shareholder returns in the long run. It analyses 17 acquisitions of Greek and foreign banking institutions by six major Greek banks during the 1998-2006 period. The model used is adjusted for market index movements, while autoregressive models are used whenever necessary. The empirical results are interesting since they support the hypothesis that acquisitions are justified in market terms whenever the size of the acquired banks, compared to the acquirer, is small, whereas they are not justified in cases where the acquired bank is relatively large in size. This may be due to the fact that the benefits from an acquisition are not visible or large enough to justify the large, in absolute terms, premium that the acquirer pays.