The impact of fintech M&A on stock returns
Technological development and digitalization plays a crucial role in financial sector by allowing firms to create value in a rapidly changing environment. The acquisitions of firms related to financial technologies are one of the ways to obtain vital knowledge. In order to identify the fintech companies we are looking at firms that are involved in business activities in both the IT and financial sectors. By examining the growing role of fintech firms in the recent mergers and acquisitions from an investor point of view, this paper contributes to the existing literature by investigating the post-acquisition performance of the acquirer firms measured by abnormal returns. We discovered significant positive average abnormal return after acquisition of fintech companies in the short-term and negative average abnormal return in the long-term using event studymethodology. The specifics of cross-border acquisitions, the level of the domestic market development of the acquirer, and other characteristics of M&A deals are considered in order to explain the reaction of investors to announcements of fintech firms’ acquisitions. The determinants of corresponding M&A deals in emerging and developed markets were revealed.
This article analyzes the global causes of the contemporary crisis and the possibilities to eliminate the most acute problems that have generated this crisis. It analyzes both the negative role of the world financial flows and their important positive functions including the ‘insurance’ of social guaranties at the global scale. Оn the one hand, anarchic and extremely rapid development of new financial centers and financial flows contributed to the outbreak of the global financial-economic crisis. The latter was amplified by the non-transparency of many financial instruments, which led to the actual concealment of risks and their global underestimation. On the other hand, new financial technologies decrease risks in a rather effective way, they expand possibilities to attract and accumulate enormous capitals, actors, and markets. The modern financial sector also contributes to the provision of insurance for social funds at the global scale. The participation of pension and insurance funds in financial operations leads to the globalization of the social sphere. Countries poor in capital, but with large cohorts of young population, are involved more and more in a very important (though not quite apparent) process of supporting the elderly portion of the population in the West through the vigorous unification of the world's financial flows, their standardization, and by increasing global mobility and anonymity.
This chapter surveys the recent trends in the literature on the performance of M&A deals in developed and emerging capital markets. This literature is voluminous, diverse and challenging. We focus on the transactions within one country – domestic M&As – in particular focusing on the methods that the researchers use to estimate whether M&A deals promote efficiency gains or not. We discuss the research instruments which allow an assessment of the effects of M&As on firm operating performance and on firm value. Analysing the results of latest empirical studies we reveal that target shareholders gain significantly in M&A deals. The evidence suggests that in most cases acquiring shareholders receive negative or insignificant returns in the short-run in developed capital markets, while in emerging economies acquiring shareholders mostly gain in M&A deals. Operating performance analysis reveals mixed results in developed and emerging capital markets, while the analysis of papers which use value performance indicators show the destruction of company value due to M&As in developed and emerging capital markets. The review also analyses studies that examine the relationship between different methods.
This paper presents an empirical analysis of the Russian market of mergers and acquisitions in 2003-2012. This analysis allowed for the conclusion that, to assess and forecast the integration activity of Russian companies, the most precise and appropriate models are seasonal autoregressive integrated moving average models built on weighted observations to eliminate the effect of the structural changes which are characteristic of developing economies. Forecasting the values of development of the market for corporate control may serve as “input” information to form a prompt regulation system for the mergers and acquisitions of holding companies, which meets current needs.
This article looks into the conceptual framework of regulation of the M&A processes that involve banks. Banking M&A still pose a serious threat to the post-crisis recovery and at the same time they remain one of the factors that can easily exacerbate systemic risks, which is also attributable to poor post-M&A synergy. Inconsistency in the M&A deal-making may aggravate post-M&A integration thus causing value deficiency, which may further trigger the contagion effect throughout the financial system and beyond. Despite the rigor paradigm of Basel III underlying contemporary banking regulation and irrespective of the increasing interconnectedness of financial institutions, M&A in the banking industry still lacks the regulatory touch.
It is doubtful that vulnerability of banking M&A to systemic risks could be solely mitigated by means of existent micro- and macroprudential regulation, since it is much about banking performance and not banking processes including the consolidation process. In fact, prudential regulation is currently devoid of multidisciplinary approach and it does not adequately meet the objectives of risk minimization in banking consolidations. Therefore, it can not appear as an unbiased and accurate measure of M&A integrity.
Guided by criticality of banking M&A regulation we propose a conceptual framework of M&A prudential regulation, or “mergulation” (“merger” + “regulation”), based on risk quantification and/or risk matrix approach together with an M&A-related rulebook. “Mergulation” will further shape mechanism of systemic risk alarmism, while standing integrated with prudential banking regulation. “Mergulation” will also aim at consistency of banking consolidations so that they would not only contribute to financial stability but also become its risk regulation platform.
This paper presents an empirical analysis of the Russian market of mergers and acquisitions (the largest market for corporate control in Central and Eastern Europe) in 2003-2012 in terms of the total volume and value of the merger and acquisition deals of the holding companies. This analysis allowed for the conclusion that, to assess and forecast the integration activity of holding companies, the most precise and appropriate models are seasonal autoregressive integrated moving average models built on weighted observations to eliminate the effect of the structural changes which are characteristic of developing economies. Forecasting the values of development of the market for corporate control may serve as “input” information to form a prompt regulation system for the mergers and acquisitions of holding companies, which meets current needs. The presented analysis makes it possible to work out measures of public policy to increase the efficiency of the integration activity of holding companies.
The industrial development of emerging markets has been a powerful driver for mergers and acquisitions. The contributions collected in this book assess major M&A deals in the largest emerging capital markets (Brazil, Russia, India, China) and their role in shareholder value creation in the markets’ specific business environments. In addition, the book explores various dimensions of M&A deals in order to summarize the main trends in corporate control markets in the largest emerging countries, and how they differ from those in developed countries; to identify deal-performance relationships and the determinants of success or failure; to reveal the drivers for the premium in M&A deals; and to capture market responses to different M&A strategies. By doing so, the book makes a significant contribution to the literature, which has to date largely focused on developed markets.
For today in academic literature there is no consensus about what factors determine the probability of a company to participate in M&A deals. Determinants of company’s M&A activity seem to be the issue of current importance. During the corporate life cycle there are changes in most company’s financial indexes. That is why the corporate life cycle stage may have a significant influence on the possibility of a company to take part in M&A. Thus, the main aim of this study is to analyze the influence of corporate life cycle stages on the probability of a company to participate in M&A deal from the perspective of acquiring firms in the developing capital markets. The analysis was provided for BRICS companies as the main drivers of M&A market. In this study for the identification of corporate life cycle stage the modified methodology of Anthony and Ramesh (Anthony, Ramesh, 1992) has been used. The application of this methodology to the emerging capital markets requires some specific adjustments of the indicators which are used in the original model. To study the influence of corporate life cycle stages on the probability of a company to participate in M&A two logistic regressions have been used. The empirical evidence from the sample of BRICS listed companies during the period from 2010 to 2013 shows the significant differences in the probability to participate in M&A deal as a buyer on the different life cycle stages. The possibility of a company to participate in M&A declines from stage to stage during the corporate life cycle. Moreover, the different influence of the same factors at various life cycle stages has been proved empirically. The research reveals the necessity of taking into account the company’s life cycle stage while investigating the probability of participation in M&A deal.
Citation: Partin I., Vasin A. (2014) Vliyanie stadii zhiznennogo tsikla kompanii na veroyatnost' ee vstupleniya v sdelku M&A na razvivayushchikhsya rynkakh kapitala [The Influence of Corporate Life Cycle on M&A Activity of the Company in Developing Capital Markets]. Journal of Corporate Finance Research, no 3 (30), pp. 23-37 (in Russian)
Keywords: mergers; corporate life cycle; acquisitions; M&A activity; M&A determinants
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.