Acquisitions, depository institutions and the creation of value
The idea that value is created through acquisitions has been widely examined throughout economics literature. This dissertation builds on the theory by analyzing the valuation effects of depository institution acquisitions that occurred between the first quarter of 2000 through the first quarter of 2004. Moreover, it contributes to the growing literature on mergers and acquisitions by examining a recent period of history from which strong conclusions have yet to be drawn. First, four separate event studies are conducted to examine the effect of an announced acquisition on stock price returns of the acquirer. Specifically, the Capital Asset Pricing Model, the Market Model, and the Mean Adjusted Returns Model are employed in determining the value created through an announced acquisition. The results show that slightly less than 50% of the acquirers experienced abnormal stock price returns around the announcement of an acquisition. Furthermore, in less than 15% of these cases did the acquirers experience positive abnormal returns, thus indicating that value is not created for the acquirer through an announced acquisition. Second, this dissertation analyzes the effect of the completed acquisition on the operating income of the acquirer. In particular, the net interest income is examined using a Mean Adjusted Returns Model. The results indicate that when using return on assets as the measure of profitability of the acquirer, approximately 50% of the acquisitions led to abnormal net interest income returns. However, when return on equity is used as the measure of profitability of the acquirer, approximately 75% of the acquisitions led to abnormal net interest income returns. These post-acquisition results suggest that value is created through acquisitions. Finally, the shareholder expectations pre-acquisition are compared with the actual financial results post-acquisition. In addition to the event study comparison, the Bayesian Theorem is also employed to test if given shareholder expectations, there is an increase in the probability of determining post-acquisition results. The outcomes of the Bayesian Theorem reveal that shareholder pre-acquisition expectations do not have any bearing on the post-acquisition results.
Marriott, Candace Magny, "Acquisitions, depository institutions and the creation of value" (2008). ETD Collection for Fordham University. AAI3310419.