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Success of Mergers and Acquisitions in the Insurance Industry: What Can We Learn From Previous Empirical Research?

Bach, Sven (2014) Success of Mergers and Acquisitions in the Insurance Industry: What Can We Learn From Previous Empirical Research? PhD thesis, Universität zu Köln.

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    Abstract

    Since the 20th century, the insurance industry has experienced an unprecedented wave of mergers and acquisitions (M&A). However, in spite of the drastic increase in insurance M&A activity, there has been little consistent empirical evidence on the value enhancement of these deals and a consistent pattern has yet to be identified. Hence, many open questions still exist in this research area. The most fundamental questions are whether insurance M&A actually create value and what determinants influence the success of these undertakings. This thesis attempts to find answers to these questions by first examining the status quo of academic literature published in this field of research and bringing together the empirical findings on the success of insurance M&A and its influencing factors. Overall, the literature review outlines that insurance M&A transactions on average tend to create value for shareholders of the target firms as well as for the combined entity of acquirer and target. Moreover, shareholders of acquiring US insurance firms, on average, also benefit from these corporate undertakings. However, negative short-term as well as long-term wealth effects for acquiring insurers’ shareholders are the common finding in capital market studies analyzing the effects of M&A transactions in the European insurance industry. Secondly, the reliability and validity of the findings of previous research are tested in an own empirical analysis which uses a fairly new approach to evaluating the success of M&A by using the idea of stochastic dominance (SD). More precisely, using a sample of 102 transactions conducted by publicly traded Western European insurance firms between the years 1993 and 2009, this work analyzes whether investors in acquiring insurance firms benefit from M&A undertakings by comparing return distributions of acquiring firm portfolios with benchmark portfolios using the first two orders of SD. The results show that insurance M&A trigger a negative short-term capital market reaction for acquiring European insurance firms. However, this short-term underperformance diminishes over time, and over a longer period of time of up to three years after M&A announcement, there is no underperformance of acquiring European insurers. In conclusion, based on the accumulated evidence from past empirical studies as well as the empirical investigation of this thesis, it can be concluded that M&A, not only in the US insurance market but also in the European insurance market, seem to be a viable model and are likely to lead to success for all parties involved.

    Item Type: Thesis (PhD thesis)
    Creators:
    CreatorsEmail
    Bach, Svensmbhome@gmail.com
    Corporate Creators: Seminar für ABWL, Risikomanagement und Versicherungslehre
    URN: urn:nbn:de:hbz:38-56383
    Subjects: Management and auxiliary services
    Uncontrolled Keywords:
    KeywordsLanguage
    M&A, Mergers and Acquisitions, Insurance, Success, Shareholder Value, Literature Review, Capital Market Research, Stochastic DominanceEnglish
    M&A, Transaktionen, Versicherung, Versicherungsindustrie, Erfolg, Literaturrecherche, kapitalmarktorientierte Untersuchung, stochastische DominanzGerman
    Faculty: Wirtschafts- u. Sozialwissenschaftliche Fakultät
    Divisions: Wirtschafts- u. Sozialwissenschaftliche Fakultät > Seminar für Allg. BWL, Risikomanagement und Versicherungslehre
    Language: English
    Date: 30 June 2014
    Date Type: Publication
    Date of oral exam: 30 June 2014
    Full Text Status: Public
    Date Deposited: 29 Jul 2014 16:35:54
    Referee
    NameAcademic Title
    Schradin, Heinrich R.Prof. Dr.
    Hess, DieterProf. Dr.
    URI: http://kups.ub.uni-koeln.de/id/eprint/5638

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