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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Veronika Karpinskaya
Effect of Mergers and Acquisitions on Company Value in the Financial Sector in Developed and Developing Capital Markets
Bachelor’s programme
2014
During the last decades there has been a huge growth in mergers and acquisitions (M&As) in the world financial sector due to substantial structural changes that has resulted in banks’ consolidation, but world financial crisis of 2008-2009 led to significant decrease of M&A activity. In this paper, the stock market reaction to the announcement of M&A deals in the financial sector is studied empirically in developed European countries before and after crisis and the effects of the deals in developed European and emerging BRICS markets are compared.The objective of this work is to assess the influence of M&A deals in the financial sector on companies’ value. Following tasks have been done to reach this goal:1. Comparative analysis of M&A influence on a company’s value in developed and developing capital markets has been conducted on the basis of previous studies.2. Main factors of M&A efficiency in the financial sector have been determined on the basis of the previous studies.3. Investigation model of M&A efficiency (event study) has been proposed.4. The influence of M&A on companies’ value in the financial sector in developed capital markets has been assessed.5. A comparative analysis of M&A influence on companies’ value in developed European and BRICS markets has been conducted.6. The main determinants of M&A efficiency in the financial sector in developed capital markets have been determined.7. A comparative analysis of main determinants of M&A efficiency in the financial sector in developed European and BRICS markets has been conducted.This study is based on the event study method, which examines the cumulative abnormal return (CAR) of company before and after M&A announcement. Abnormal return equals the difference between actual return and normal return. The first step was the selection of event window of 41 days. Next, the normal return, based on the market model was calculated over the estimation period of 150 days before the event window. Market index was taken as Eurostoxx 50 (leading Eurozone index). Then CAR (sum of acquirer’s average abnormal returns over the event window) was calculated. Also linear regression, which shows the relationship between CAR and various factors of M&A deals, was built.This study is based on a sample of acquirers from developed European countries, classified by IMF. Selection criteria are: 2000-2013 (the crisis period is excluded) , acquirer is public, liquid company in the financial sector (banks, investment and insurance companies) , target is company from financial and non-financial sectors, the transaction value is more than 100 million U.S. dollars, acquirer buys a majority stake (50% +1). Bloomberg was used to obtain all necessary financial and economic information about M&A deals. The final sample is consisted of 72 transactions, where 52 are cross-border deals and 20 are national deals.Results are as follows: size of acquirer and GDP per capita of acquirer's country have a positive impact on the bidder CAR, whereas cross-border transactions, diversification strategy, deal size, ROA, previous M&A experience and Tobin’s Q have negative effect. The impact of deal payment by cash and relative GDP haven’t been found. A comparative analysis revealed that national deals and acquirer size positively affect the CAR in developed and developing capital markets, while the previous M&A experience has negative effect. The influence of other factors is different for these two markets.Karpinskaya VeronikaE-mail: veronika700@gmail.comPhone number: 89263457032

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