Market Expansion by Merger & Acquisition Strategy in USA Banking System

This paper aims to analyze the financial impacts of mergers and acquisitions (M&A)as one of the most common strategies for expanding market share in banking system. Based on this approach, this paper will answer the following question; do mergers and acquisitions create value for shareholders of target and acquirer firms in US banking industry? According to the main research question, this study is concentrated on the mergers and acquisitions in banking industry across the US in order to find out the stock price behavior of targets and acquirers based on the M&A announcement over the period 2000- 2010 (10 years) in a sample of 154 deals. This paper has classified the deals in three main categories to provide a unique opportunity for analyzing the stock price behavior in different situations and scenarios. This research has assumed that there are no other special events in the estimation period (-60, +60) and therefore, has focused on the actual return rather than abnormal return. For the future researches, it’s recommended to use the abnormal return instead of the actual return in order to neutralize the movements in prices that result from factors other than the specific announcement under investigation. According to the results, M&A announcement in US banking environment has been considered as one of the most successful strategies for market expansion due to its positive average actual return over the event window. It should be also considered that this research has analyzed the M&A deals from the financial point of view. Hence, for the future research, it’s strongly recommended to take other business factors into account. It’s also important that this sort of market expansion strategies has to be compared to other available options as well

Keywords:

Market Expansion , Merger and Acquisition , Stock Price Behavior , US Banking , Target , Acquirer , Event Study