Sanjukta Brahma, Agyenim Boateng and Sardar Ahmad
The purpose of this paper is to investigate the motivation and post-merger operating performance (OP) of European utility sectors following mergers and acquisitions (M&A).
Abstract
Purpose
The purpose of this paper is to investigate the motivation and post-merger operating performance (OP) of European utility sectors following mergers and acquisitions (M&A).
Design/methodology/approach
Motives behind M&A are examined by looking into the relationships between total gains, target gains and acquirer gains. Post-merger OP is measured by comparing the sample of European utilities with a matched portfolio based on size and market to book ratio with respect to five accounting indicators: growth in turnover, growth in earnings before interest and tax, return on assets, net profit margin and growth in fixed assets.
Findings
Synergy is the primary motive for M&A in the European utility firms. This study also found that post-merger OP is negative and significant across all the five accounting indicators matched by size, and market to book ratio suggesting that utility mergers underperform in the long term. The findings suggest that gains accruing to utilities involved in acquisitions are short term in nature.
Practical implications
Negative post-merger OP bears important policy implications as in future antitrust/competition authorities should be more vigilant before approving utility mergers.
Originality/value
Public utilities possess several characteristics that are different from industrial firms and therefore need to be examined separately. Empirical literature on M&A is very limited on utilities. This study has addressed this gap by examining the motivation and post-merger OP of the European utility firms.
Details
Keywords
Yang Liu, Sanjukta Brahma and Agyenim Boateng
The purpose of this paper is to examine the effects of bank ownership structure and ownership concentration on credit risk.
Abstract
Purpose
The purpose of this paper is to examine the effects of bank ownership structure and ownership concentration on credit risk.
Design/methodology/approach
Using panel data on a sample of 88 Chinese commercial banks, with 826 observations over a period of 2003–2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio (NPLR) and loan loss provision ratio (LLPR).
Findings
The results show that ownership type (both government and private ownership) exerts a positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl–Hirchmann Index, the results indicate that concentration of ownership in the hands of government has a negative and significant effect on credit risk, whereas private ownership concentration positively impacts credit risk. Overall, the findings suggest that concentration of ownership in government hands reduces risk; however, private ownership concentration exacerbates credit risks. The results are invariant to both measures of credit risk, before and after the financial crisis.
Practical implications
The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership.
Originality/value
Using two ex post measures of credit risk, NPLR and LLPR, and one ownership concentration measure, HHI, this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks.