Share price reactions to M&A announcements: An empirical analysis of CaixaBank’s acquisition of Bankia

Abstract

This paper examines the reaction of stock prices to the announcement of CaixaBank’s acquisition of Bankia, a major consolidation in the Spanish banking sector completed in 2021. The deal aimed to strengthen CaixaBank’s market position, increase operational efficiency, and generate significant cost synergies. This dissertation explores the strategic motivations behind the acquisition and analyses its implications for market participants, focusing on whether the announcement generated value for shareholders. The core of the study is a short-term event analysis, assessing the abnormal returns of both CaixaBank and Bankia using a (-3, 0, +3) event window surrounding the announcement date. Based on the market model, the study calculates abnormal returns, t-statistics, and Patell z-statistics to determine the statistical significance of market reactions. The results show that Bankia experienced a large and statistically significant positive abnormal return on the day following the announcement, confirming expectations from existing literature that target firms tend to benefit from acquisition premiums and perceived synergies. CaixaBank, the acquiring firm, also registered a positive abnormal return the day after the announcement, although its cumulative return across the event window was not statistically significant. This reflects a mixed but broadly positive market sentiment toward the deal. To complement the short-term perspective, a long-term performance analysis compares CaixaBank’s post-merger share price evolution, with its main Spanish banking peers over a three-year period. By indexing share prices to a base of 100, the analysis shows that CaixaBank’s performance was steady but not exceptional, aligning with the market trend but getting behind of competitors like BBVA or Sabadell. These findings suggest that while the acquisition was positively received in the short term, especially for Bankia, the long-term impact on CaixaBank’s market valuation was moderate, showing that long-term value creation depends heavily on post-merger execution.