The Static and Dynamic Effects of Mergers and Acquisitions on Productivity in The period Post-Subprime Crise: An Empirical Application to the Banking Sector in the European Union

HASSEN, TOUMI and FAKHRI, ISSAOUI and BILEL, AMMOURI and WASSIM, TOUILI (2015): The Static and Dynamic Effects of Mergers and Acquisitions on Productivity in The period Post-Subprime Crise: An Empirical Application to the Banking Sector in the European Union.

Abstract

This article aims to detect the dynamic effect of M & A of European banks on productivity during the period from 2005 to 2013. The estimation of our model by the GMM method allowed us to detect the following results. First, in the long term, the European banking structure seems to be submitted to the convergence phenomenon which means that the banking industry will probably governed by monopolistic structures which will share the market equally or nearly equal. Second, the production factors (labour and capital), had positive and significant effects on the banking product. However, the returns to scale are found to be decreasing as long as the sum of the labour coefficient (0.317) of fixed assets (0,132) and liquid assets (0.351) is less than unity. Third, the time had exerted a negative and significant effect on production which questions the validity of the chosen period characterized by the advent of the subprime crisis. Fourthly, the M & A had a significant positive instantaneous effect on production of banks which allows us to affirm that in a pessimistic environment; it seems that the M & A strategies can be effective solutions to overcome the crisis. Fifth, the dynamic effects of M & A are positive and significant on production which means that the advantage of said M & A appears better in the long term as long as in this time horizon the merged banks are more able to realize their mergers reducing the cost of restructuring and to release more than returns to scale.

• Item Type: MPRA Paper
• Language: English
• Keywords: M&A, productivity, dynamic effects, GMM
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

Abreu, M., Mendes, V., 2001. Commercial bank interest margins and profitability: evidence from some EU countries. In: Paper presented at the Proceedings of the Pan-European Conference Jointly Organized by the IEFS-UK & University of Macedonia Economic & Social Sciences, Thessaloniki, Greece, May 17–20, 2001.

Amel D, Barnes C, Panetta F, Salleo C. Consolidation and efficiency in the financial sector: a review of the international evidence. Journal of Banking & Finance 2004; 28:2493–519.

Angbazo, L., 1997. Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking. J. Bank. Finance 21, 55–87.

Ben Naceur, S., 2003. The determinants of the Tunisian banking industry profitability: panel evidence. In: Paper presented at the Proceedings of the Economic Research Forum (ERF) 10th Annual Conference, Marrakesh–Morocco, December 16–18, 2003.

Bernheim D, Whinston MD. Multimarket contact and collusive behavior. RAND Journal of Economics 1990; 21:1–26. Breitung, J., 2000. The local power of some unit root tests for panel data. Advances in Econometrics 15, 161–177.