The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry

Mergers and acquisitions (M&As) are mainly a mechanism used in the Latin American banking industry to carry out business consolidation. This paper focuses on the effect of M&A announcements on stocks of Latin American banks and their rivals between 2000 and 2019. We evaluate two impacts of M...

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Autores:
Lozada, Juan M
Cortés, Lina M.
Velasquez Gaviria, Daniel
Tipo de recurso:
Fecha de publicación:
2020
Institución:
Universidad EAFIT
Repositorio:
Repositorio EAFIT
Idioma:
spa
OAI Identifier:
oai:repository.eafit.edu.co:10784/15887
Acceso en línea:
http://hdl.handle.net/10784/15887
Palabra clave:
Emerging Markets
GARCH event study
Latin America
Banking industry
Rights
License
Acceso abierto
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spelling Medellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degrees2020-02-27T15:59:26Z2020-02-192020-02-27T15:59:26Zhttp://hdl.handle.net/10784/15887C32G14G21G34Mergers and acquisitions (M&As) are mainly a mechanism used in the Latin American banking industry to carry out business consolidation. This paper focuses on the effect of M&A announcements on stocks of Latin American banks and their rivals between 2000 and 2019. We evaluate two impacts of M&A announcements: impacts on cumulative abnormal returns (CAR) and impacts on event-induced variance (EIV). We use the GARCH-based event-study method. We find that acquirers and target banks have a statistically significant CAR, however, the sign is inconclusive. Rivals of acquirers and targets are not affected by M&A announcements. In general, we observe that EIV is negative for acquirers, targets, and rivals. Finally, we estimate a multivariate GARCH model to isolate the effects of co-movements of volatility between the acquirer and the target, and we find that the results remain qualitatively equal.spaUniversidad EAFITEscuela de Economía y FinanzasThe Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking IndustryworkingPaperinfo:eu-repo/semantics/workingPaperDocumento de trabajo de investigacióndrafthttp://purl.org/coar/version/c_b1a7d7d4d402bccehttp://purl.org/coar/resource_type/c_8042Acceso abiertohttp://purl.org/coar/access_right/c_abf2Emerging MarketsGARCH event studyLatin AmericaBanking industryjmlozadah@eafit.edu.co.lcortesd@eafit.edu.codanielvelasquez@itm.edu.coLozada, Juan Mf72429d8-599e-465d-b771-5c8fb6e2c4cd-1Cortés, Lina M.d512530b-e532-45b9-baa6-ab16fae407ac-1Velasquez Gaviria, Daniel8c26f297-8504-4d0e-8069-cbdfc0fa73db-1LICENSElicense.txtlicense.txttext/plain; charset=utf-82556https://repository.eafit.edu.co/bitstreams/d109d6a0-351d-49a8-bf8f-dd7f90817a47/download76025f86b095439b7ac65b367055d40cMD51ORIGINALWP-2020-08_Lina Cortes.pdfWP-2020-08_Lina Cortes.pdfapplication/pdf1318644https://repository.eafit.edu.co/bitstreams/7709d6b5-d78a-46cf-a046-82483197cc18/download00d6a40b7079db2539656d3afd1c361cMD5210784/15887oai:repository.eafit.edu.co:10784/158872024-12-04 11:49:33.362open.accesshttps://repository.eafit.edu.coRepositorio Institucional Universidad EAFITrepositorio@eafit.edu.co
dc.title.eng.fl_str_mv The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
title The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
spellingShingle The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
Emerging Markets
GARCH event study
Latin America
Banking industry
title_short The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
title_full The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
title_fullStr The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
title_full_unstemmed The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
title_sort The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry
dc.creator.fl_str_mv Lozada, Juan M
Cortés, Lina M.
Velasquez Gaviria, Daniel
dc.contributor.eafitauthor.none.fl_str_mv jmlozadah@eafit.edu.co.
lcortesd@eafit.edu.co
danielvelasquez@itm.edu.co
dc.contributor.author.none.fl_str_mv Lozada, Juan M
Cortés, Lina M.
Velasquez Gaviria, Daniel
dc.subject.keyword.spa.fl_str_mv Emerging Markets
GARCH event study
Latin America
Banking industry
topic Emerging Markets
GARCH event study
Latin America
Banking industry
description Mergers and acquisitions (M&As) are mainly a mechanism used in the Latin American banking industry to carry out business consolidation. This paper focuses on the effect of M&A announcements on stocks of Latin American banks and their rivals between 2000 and 2019. We evaluate two impacts of M&A announcements: impacts on cumulative abnormal returns (CAR) and impacts on event-induced variance (EIV). We use the GARCH-based event-study method. We find that acquirers and target banks have a statistically significant CAR, however, the sign is inconclusive. Rivals of acquirers and targets are not affected by M&A announcements. In general, we observe that EIV is negative for acquirers, targets, and rivals. Finally, we estimate a multivariate GARCH model to isolate the effects of co-movements of volatility between the acquirer and the target, and we find that the results remain qualitatively equal.
publishDate 2020
dc.date.available.none.fl_str_mv 2020-02-27T15:59:26Z
dc.date.issued.none.fl_str_mv 2020-02-19
dc.date.accessioned.none.fl_str_mv 2020-02-27T15:59:26Z
dc.type.eng.fl_str_mv workingPaper
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dc.type.coar.fl_str_mv http://purl.org/coar/resource_type/c_8042
dc.type.local.spa.fl_str_mv Documento de trabajo de investigación
dc.type.hasVersion.eng.fl_str_mv draft
dc.identifier.uri.none.fl_str_mv http://hdl.handle.net/10784/15887
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url http://hdl.handle.net/10784/15887
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http://purl.org/coar/access_right/c_abf2
dc.coverage.spatial.eng.fl_str_mv Medellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degrees
dc.publisher.spa.fl_str_mv Universidad EAFIT
dc.publisher.department.spa.fl_str_mv Escuela de Economía y Finanzas
institution Universidad EAFIT
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repository.name.fl_str_mv Repositorio Institucional Universidad EAFIT
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