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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title The need for M&A consolidation in the European Banking industry: empirical evidence of efficiency gains
Organization Unit
Authors
  • Carlo Forattini
Supervisors
  • Michel Habib
  • Jacqueline Haverals
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 63
Date 2019
Abstract Text The purpose of this study is to examine the industrial status the European banking, describing the developments after the financial crisis and to investigate the profitability improvements resulting from consolidation. In particular, this work tries to assess the profitability behavior of bank-specific variables using a dataset of European credit institutions in relation to economic and industrial indicators. After a brief introduction on the current situation of the banking industry and sector M&A, followed by literature review of both general and specific matter studies, this paper focuses on two main elements: • firstly, it addresses the question as to whether there is excess capacity in the European banking sector, examining the main industrial metrics and highlighting inconsistencies and discrepancies between banking and macroeconomic developments for the period between 2012 and 2017. • secondly, it investigates the relationship between efficiency and industrial concentration (or consolidation) in 2017. While most of similar works use an event study to examine the effect of M&A announcements to stock returns (abnormal returns), this paper focuses on accounting measures of profitability. A key result is that the effect of concentration is positive on top-line profitability, mainly due to superior pricing-power, and is not statistically significant on bottom-line profitability, given the ambiguity resulting from the interrelationship with country-specific situations (different stage in the economic cycle and bank reforms etc.). Indeed, concentration has different impacts on different P&L items, both in terms of magnitude and direction (positive or negative). This work is a good starting point for enhancing further research, especially once bank regulation in respect to capital requirements will be stable and banks will have transitioned to the new regime (which might reduce differences across countries).
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