The impact of investor protection and bank regulation on the shareholder wealth : evidence from merger and acquisition announcements in the banking industry

摘要

This thesis studies the impact of investor protection and bank regulation on the shareholder wealth around merger and acquisition announcements in the banking industry during the period 1995-2005. The analysis is based on 508 targets, 1,424 bidders and 388 combined firms covering over 30 countries. Using the event study methodology, the results show that targets, bidders and combined firms obtain 13.25%, -0.63% and 0.39% cumulative abnormal returns over a 3 day (-1,+1) event window, respectively. In addition, cross-sectional analysis reveals that target cumulative abnormal returns are positively related to investor protection measured as the antidirector rights and rule of law in a target country. The findings also indicate that targets gain more when bank regulation in a target country has more restriction on bank activity, official supervisors have more power to intervene the deals and supervisors have more power to correct the problem in mergers and acquisitions separately. Furthermore, the results show that bidders have lower gains when investor protection in a bidder country measured as rule of law is strong. The results also find that bidders gain less when bank regulation in a bidder country has more restriction on bank activity. However, the findings show that bidders gain more when supervisory authority in a bidder country is more independent. With respect to combined firms, the results find that combined firms obtain higher announcement returns when investor protection measured as the combination of the antidirector rights index in a target and bidder country is strong.