Effects Of Cross Border Mergers and Acquisitions on Financial Institutions



ACKNOWLEDGEMENT

I would first like to express my gratitude for my research supervisor, colleagues, and peers and family whose immense and constant support has been a source of continuous guidance and inspiration.

DECLARATION

I [type your full first names and surname here], declare that the following dissertation/thesis and its entire content has been an individual, unaided effort and has not been submitted or published before. Furthermore, it reflects my opinion and take on the topic and is does not represent the opinion of the University.

Signature:

Dated:

ABSTRACT

The 20th century has experienced a strong wave of mergers and acquisitions and due to that it has drawn attention of many researchers and became one of the most researched areas in industrial organisation. This dissertation has also been inspired from the existing wave of mergers and acquisition in the industry, which is constantly increasing, despite the fact that there is no guarantee for the success of firms after mergers. Thus, this dissertation aimed at examining the effects of cross border mergers and acquisitions on the performance of all the financial institutions by reviewing existing literatures. The main findings say that there are both kind of impacts of mergers and acquisitions on the performance of financial institutions, good and bad. From the prior researches, it has been observed that most of the studies have used event-study methodology for finding out the impacts of merger announcements on share price performance. It has been examined that acquisitions have an insignificant impact on shareholders' wealth in the short-run after the announcement of takeover. While, performance measured by long-run event studies have shown negative returns. It has also been found that usually targeted firms get more benefits out of an acquisition in comparison of the firm acquiring it. The major aim of the acquiring firm is capturing the market share and diversification just after the acquisition rather than focusing over the profitability. Thus, productivity and thereby profitability of an acquiring firm is impacted heavily. Moreover, empirical research also used accounting ratios indicators such as cost-to-income, ROI and ROA, for finding the impacts of mergers and acquisition over efficiency. The evidence gained from this research showed mixed results too. Major evidences show that the effect of mergers and acquisition over efficiency is not significant. As the efficiency gains are derived from cost reductions which might take a long time to appear. However, there can be many other variables affecting the distribution of the returns such as location of the acquisition, language, legal origin, geographical distance, changes in the exchange rate, the presence of the acquiring firm in the targeted country. Hence one cannot come to a conclusion as the effects varies according to the type and nature of the deal.

TABLE OF CONTENTS

ACKNOWLEDGEMENTii

DECLARATIONiii

ABSTRACTiv

CHAPTER 01: INTRODUCTION8

Background8

Research Questions10

Terminologies10

Mergers and Acquisition10

Financial Institution11

CHAPTER 02: MERGERS AND ACQUISITIONS IN THE FINANCE INDUSTRY13

What Motivates Firms to Undertake Cross-Border Acquisitions?13

Effect of Mergers and Acquisitions on Banks17

CHAPTER 03: LITERATURE REVIEW24

Aims and objective for Acquisitions and Mergers cross the Border26

1) Factors Influencing Cross-border Acquisitions:28

2) ...