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Mergers and Acquisitions and Brazilian Banking Stock Market Volatility: An Application of GARCH Models

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  • Gabriel Pessanha
  • Nádia Pereira
  • Cristina Calegário
  • Thelma Sáfadi
  • Leiziane Neves de Ázara
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<mark>Journal publication date</mark>21/12/2016
<mark>Journal</mark>LATIN AMERICAN BUSINESS REVIEW
Issue number4
Volume17
Number of pages23
Pages (from-to)333-357
Publication statusPublished
Original languageEnglish

Abstract

The main objective of this research was to investigate the impacts caused by announcements of mergers and acquisitions (M&As) on the volatility of the returns of Brazilian bank stocks from 1994 to 2015. In order to achieve the proposed objective, this study applied Generalized Autoregressive Conditional Heteroscedastic (GARCH) class models to the series to model their volatility. Our results confirmed the impact of the announcement of M&As on volatility. They suggest that M&A announcements are expected to cause a negative reaction if related to an expansion or a deal involving a less-well known bank, and a positive reaction if it involves well-known bank with good reputation—a higher level of confidence and a lower level of information asymmetry for investors.