XXVI Edition

14-15-16 December 2017"

Turkish Bank Acquisitions and Partial Sales: Changes in Risk and Return

Tanyeri Ayse Basak Tanyeri, Bilkent University
Salih-Altay Aslihan, TED University

Globalization, deregulation that eased bank entry and the potential to integrate into the European market with its bid to join European Union triggered a merger wave in Turkish banking. We investigate how massive restructuring affects the stock returns and risk of target banks in an emerging market, Turkey. Target 3-day cumulative abnormal returns (CARs) around acquisition announcements average 6 percent. News about acquisitions spread in rumors prior to formal acquisition announcements and when we cumulate abnormal returns from the date of the first rumor to the announcement date, target CARs increase to 27 percent. The systematic and idiosyncratic risk of target banks significantly decrease in the three years following the successful conclusion of deals. The positive and significant CARs indicate that investors priced the anticipated economies of scale and scope which Turkish banks would realize when acquired by international mega-banks. The post-merger reduction in systematic and idiosyncratic risk affirms the realization of the anticipated economies of scale and scope.

Area: Banking

Keywords: Bank partial sales and acquisitions, Turkish financial markets

Paper file

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