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The value added by private equity in mergers and acquisitions by financial institutions

The value added by private equity in mergers and acquisitions by financial institutions
The value added by private equity in mergers and acquisitions by financial institutions

We compare and contrast (i) mergers and acquisitions (M&As) by financial institutions (FIs) that had the involvement of one or more private equity firms (PE) with (ii) acquisitions with no private equity involvement. We find that the M&A announcement abnormal stock returns are higher for acquisitions with- than without private equity involvement. Likewise, the post-announcement long-term annual stock returns are higher for deals with PE involvement. These deals also produce higher operating performance, and their stocks exhibit less volatility in the months following the announcement after controlling for a host of confounding variables. Our results are robust to year fixed effects, industry (i.e. business line) effects, and self-selection bias.

Financial institutions, banks, mergers and acquisitions in the financial industry, private equity
0003-6846
5898-5916
Brodmann, Jennifer
7926205a-e964-4b49-adb5-6bac15fe2417
Danso, Charles
243c810f-90d5-4116-abd4-77af666bb4c1
Jory, Surendranath Rakesh
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Brodmann, Jennifer
7926205a-e964-4b49-adb5-6bac15fe2417
Danso, Charles
243c810f-90d5-4116-abd4-77af666bb4c1
Jory, Surendranath Rakesh
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b

Brodmann, Jennifer, Danso, Charles, Jory, Surendranath Rakesh and Ngo, Thanh (2021) The value added by private equity in mergers and acquisitions by financial institutions. Applied Economics, 53 (51), 5898-5916. (doi:10.1080/00036846.2021.1931657).

Record type: Article

Abstract

We compare and contrast (i) mergers and acquisitions (M&As) by financial institutions (FIs) that had the involvement of one or more private equity firms (PE) with (ii) acquisitions with no private equity involvement. We find that the M&A announcement abnormal stock returns are higher for acquisitions with- than without private equity involvement. Likewise, the post-announcement long-term annual stock returns are higher for deals with PE involvement. These deals also produce higher operating performance, and their stocks exhibit less volatility in the months following the announcement after controlling for a host of confounding variables. Our results are robust to year fixed effects, industry (i.e. business line) effects, and self-selection bias.

Text
May 2021_The Value Added by PE (revised for AE- author info) - Accepted Manuscript
Restricted to Repository staff only until 11 December 2022.
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More information

Accepted/In Press date: 11 June 2021
e-pub ahead of print date: 11 June 2021
Keywords: Financial institutions, banks, mergers and acquisitions in the financial industry, private equity

Identifiers

Local EPrints ID: 450447
URI: http://eprints.soton.ac.uk/id/eprint/450447
ISSN: 0003-6846
PURE UUID: a4a66a6e-5532-4ef1-aca5-7e9f2c441805
ORCID for Surendranath Rakesh Jory: ORCID iD orcid.org/0000-0002-8265-0001

Catalogue record

Date deposited: 28 Jul 2021 16:31
Last modified: 28 Apr 2022 02:08

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Contributors

Author: Jennifer Brodmann
Author: Charles Danso
Author: Thanh Ngo

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