Analyzing merger premiums and its implication on publicly listed acquiring banks' stock performance in the Philippine banking industry for the period 1996-2005: A real options approach

• Main Authors: Labog, Edilley S., Limvalencia, Chester S., Pajarillo, Maria Kristina C., Tiutan, Michael Joseph C.
• Format: text
• Language: English
• Published: Animo Repository 2008
• Subjects: Banks and banking > Philippines; Consolidation and merger of corporations > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18324
• Institution: De La Salle University

The proponents conducted a study on the analyis of premiums during bank mergers and acquisitions and its implication on publicly listed acquiring banks' stock performance in the Philippine banking industry using a real options approach (ROA). After gathering the necessary data from institutions affiliated with the banking sector which includes Bangko Sentral ng Pilipinas (BSP), Securities Exchange Commission (SEC), Philippine Stock Exchange (PSE) and Bloomberg, the proponents assessed if there occurs an issue of overpayment or underpayment in Philippine bank mergers and acquisitions (M&A's) by comparing the computed actual premium paid by the acquiring bank and the option premium derived using a real options approach. The results showed that majority of the merger deals included in the sample were overpaid dominated by the Bank of the Philippine Islands (BPI) and Equitable Bank (EB) as the acquirers. Conversely, Metropolitan Bank and Trust Company (MBTC) closed underpaid transactions with its acquisition of Solid Bank (SB) and Global Business Bank (GBB). Moreover, to see the implication of overpayment or underpayment on the acquiring banks's stock performance, the proponents compared the average abnormal returns of the acquirers before and after the merger duration by applying necessary statistical tools such as paired samples T-test and Wilcoxon signed-ranked test. The outcome of the study reveals that there is no significant difference in the values of the average abnormal returns of the acquiring banks, which consequently means that the issue of overpayment or underpayment has no implication on the acquiring banks' stock performance.