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Contribution Details

Type Bachelor's Thesis
Scope Discipline-based scholarship
Title How does the interest rate of the European Central Bank affect the M&A behaviour within the European Union?
Organization Unit
Authors
  • Tanja Bekic
Supervisors
  • Yanjie Wang
  • Michel Habib
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 43
Date 2022
Abstract Text This study examines the relationship between the European Central Bank's key interest rate and the mergers and acquisitions (M&A) activity in 12 European countries that are directly influenced by this rate. A time period of 20 years is examined, starting on 1 January 2000 and ending on 31 December 2020, to ensure a broad temporal coverage. The European Central Bank (ECB) exerts its influence through three different key interest rates which steer the interest rate business of commercial banks. The effect of the Main Refinancing Operations Rate, the interest rate at which commercial banks can borrow money from the ECB, is analysed and treated as an independent variable in this study. The takeover activity is analysed in two ways: On the one hand, the number of transactions carried out and, on the other hand, the volume of these transactions. These two figures are treated as dependent variables. In a first step, linear regressions are performed to measure the effect of the relationship, followed by a regression discontinuity analysis to find out whether there is a causal effect caused by the introduction of the zero interestrate on frequency and value of completed M&A deals. The results of the linear regressions indicate a positive significant relationship between the level of the interest rate and the activity of takeovers as well as in the volume of takeovers. A causal effect could be found through the regression discontinuity analysis between the interest rate and the number of completed transactions but not between the key interest rate and the value of transactions.
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