Does Bancassurance Add Value to Banks? - Evidence from Mergers and Acquisitions between European Banks and Insurance Companies

摘要

This paper is the first comprehensive study of the risk and wealth effects of mergers and acquisitions between banks and insurance companies. The empirical results indicate that while acquirers’ total risk remains relatively constant, their systematic risk falls relative to their home banking indices. Acquiring banks experience negative and statistically significant short term abnormal returns. In the case of cross-border deals as compared to domestic deals, empirical results show a reduction in risk without a loss of wealth for the bidder banks. We also observe a reduction in beta risk associated with a negative abnormal return for the home banking index. The empirical results also show that in the long run, there is no abnormal return associated with mergers and acquisitions between banks and insurance companies. The empirical results demonstrate that due to high leverage in banks, there is a transfer of wealth from stockholders to debt holders due to a reduction in beta risk. Finally, one can also note that greater synergy is generated, when the deal size relative to the bidder’s market value is greater.