Mergers and Acquisitions of Financial Institutions During the Subprime Mortgage Crisis and the European Sovereign Debt Crisis

Sammanfattning: This thesis is composed of two different papers in the field of empirical bank M&A analysis. In the first paper "Testing the Deposit Insurance Put Option Hypothesis for Acquisitions by EU-27 and US Banks," we test the validity of the "deposit-insurance hypothesis" and the "earnings diversification hypothesis" for a sample of EU-27 and US bank M&A transactions during the US-Subprime Mortgage Crisis and the European Sovereign Debt Crisis. Our results suggest that while acquirers from the EU-27 value the ability to diversify, US acquirers value the ability to increase the value of the deposit insurance put option. In the second paper "Regulatory Drivers of Premiums and of Market Reactions to Merger Announcements," we analyse the influence of regulatory drivers on the percentage book value premium for a sample of European bank M&A transactions during the US-Subprime Mortgage Crisis and the European Sovereign Debt Crisis. We, furthermore, analyse the impact of regulatory drivers on the cumulative abnormal returns for the buyer's stock following the announcement of the merger for the crises periods. Our results suggest a negative influence of the degree of regulatory strength and shareholder protection on the percentage book value premium in domestic M&A transactions. For the market reaction analysis, we observe a negative cumulative abnormal return for the bidder's stock around the merger announcement day. We find support that the degree of equity capitalisation of the target, weak shareholder protection in domestic mergers, and strong shareholder protection in cross-border mergers drive the cumulative abnormal returns of the acquirer's stock for European bank M&A transactions during the financial crises.