M&A Transactions: Drivers or Deterrents of Banking Profitability?

Abstract

This paper investigates the implications of mergers and acquisitions on banking profitability as tracked by net interest margin, return on equity, and return on assets. Using a sample of 568 completed transactions from 2000 – 2018 an event study is conducted. The result do not show evidence of a significant relationship between M&A transactions and bank profitability. It does, however, provide evidence of a statistically significant relationship between the size of the bank, efficiency, and the bank's profitability. These results lean in favor of the efficiency structure hypothesis.