Journal of Financial Economics

REF 110 Mergers and acquisitions - 50 years of African monetary unions - Property crises and financial crises

Since mergers and acquisitions (M&A) are publicly observable and require a significant amount of acquirer resources, they tend to attract the academic community attention. Do M&As allow an efficient resource allocation across the economy? Do we observe a net wealth creation or is it a mere transfer from one agent to another? The current literature reveals a widespread consensus about the positive impact of the M&As on the shareholder value, at least from the view point of the target firms. But when we broaden the analysis including other stakeholders, the results are more mixed. Evidence on the impact on labor depends on the regulatory framework. If we study the impact on consumers, results are either neutral or positive. Last, M&As seem to foster more focused innovation.

During the last twenty-five years and as being observed worldwide, the European banking industry has undergone major changes mainly fuelled by a great wave mergers and acquisitions. This article reviews and analyses the reasons and consequences of the numerous transactions which occurred between 1990 and 2008. Over the last years and because of the financial and economic crisis, the number of operations decreased dramatically as well as their average amounts. For the years to come, transactions in Europe should remain modest and focused on the sale of non-strategic assets.

European bank CEOs are beginning to focus more closely on merger and acquisition opportunities. Deleveraging, regulatory pressure for reform and the need for banks to operate more profitably mean that a wide array of financial sector assets will be sold in the next few years. Up until mid-2013, financial sector asset sales have proceeded slowly. However, several factors will help underpin M&A activity in European banking sector assets for some time to come.

The article offers a multidimensional view of European bank M&A. It provides historic background and considers the factors bringing European bank assets to the market. Thisleads to a thematic analysis of M&A value creation and a review of acquirers expected to feature in the next M&A wave.

First we investigate the main features of mergers and acquisitions in the European financial services industry since the 2007 financial crisis and highlight the induced lessons for the European banking sector in the years to come. Then we analyze the likely key drivers of mergers and acquisitions in the global banking industry and review the main countries and areas in which these drivers are already operating.

The Central and West African Monetary Unions, the oldest monetary unions in economic history, have undergone major changes in the past fifty years. These changes have helped to strengthen their institutional framework and have contributed to fostering closer regional integration by giving rise to economic unions as of 1994. However, much remains to be done in both monetary unions in order to reap the full benefits of this regional integration process, in particular to enhance the effectiveness of monetary policy, deepen financial integration and address the challenges stemming from these developments. Avenues of progress can already be identified in such a way as to promote a more active monetary policy, strengthen the mutual surveillance of fiscal policies and macroeconomic imbalances and implement crisis management mechanisms.

Since the early 1990’s the Bank of Central African Countries (BEAC) has undertaken a series of important reforms. The purpose of this paper is to identify and understand them in light of the theoretical and empirical literature on central banks autonomy. First, we highlight the recent changes in the Franc zone which also governs the functioning of the BEAC. Second, we note changes that contribute to BEAC autonomy both at the institutional level and in terms of monetary policy. Third, we suggest: (i) an improved governance of the BEAC through better internal management and increased transparency of monetary policy; (ii) an improved governance of the Central African Economic and Monetary Community (CEMAC) by strengthening the regional integration process through improvements of business environment and through a better coordination between monetary and national fiscal policies prior to the establishment of an optimum currency area.

On the fiftieth anniversary of the West African Monetary Union, it is timely to make an assessment of the efficiency of the common monetary policy, implemented by the West African States Central Bank (BCEAO) responsible for the management of CFA franc.

Deep analysis shows that initial goals – economic growth and more generally, contracyclicity of economic policies – were sacrificed to the fight of inflation which is difficult to curb because of its non-monetary origin within the WAMU area. Finally, and in consideration of the multiple economic development challenges, it would be useful to improve Monetary Policy monitoring in the Zone Franc, towards a more flexible FCFA/Euro parity and an economic government based on fiscal solidarity.

The paper studies the role of the financial system in the greatest real estate crisis experienced by the French economy until the recent crises of the 1990s and 2007-2013. It first emphasizes the role of the financial factors (financial innovations and low interest rates) in the boom of the years 1876-1882. Second it shows that the bust of 1882 and the ensuing crisis did not induce a collapse of the banking system similar to that of the recent years because of the growing role of the Crédit de France (CFF) and the development of the financial market. However, it finally demonstrates, that the further management of the crisis by the CFF, coupled with the withdrawal of commercial banks, is partly responsible for the long stagnation of the real estate market until the late 1900s and the failure of financing popular housing.

Les marchés immobiliers européens se sont largement financiarisés dans les années 2000. La financiarisation de l’immobilier évoque la transposition au secteur immobilier, par nature localisé, du phénomène de mondialisation des capitaux et des investisseurs, ainsi que l’application des approches et techniques financières dans la gestion des actifs. En se financiarisant, l’immobilier est désormais considéré, géré et arbitré comme un actif financier. La financiarisation de l’industrie immobilière repose sur le poids considérable et croissant des investisseurs internationaux. Cet article présente les différentes étapes de la financiarisation de l’immobilier qui est apparue en France au milieu des années 1990 lors de la gestion de la crise immobilière des bureaux par les fonds d’investissement dits opportunistes, majoritairement nord-américains.

Classification JEL : G01, G21, G23, N14, R30.

European property markets became extensively financialized in the 2000s. The financialization of real estate reflects the transposition to the real estate sector, which is by nature localised, of the globalization of capital and investors, and application of financial approaches and techniques in property management. As real estate has become more financialized, property has come to be considered, managed and run like a financial asset. The financialization of the real estate industry is built on the major and growing influence of international investors. This paper investigates the stages of financialization in the real estate industry in France, which began in the mid-1990s with the intervention in the 1990s office property crisis by what are known as opportunistic investment funds, mostly based in North America.

The present crisis of the Spanish financial system is mainly to be found in a real estate crisis, appeared in 2007 with the outburst of a speculative bubble grounded in hazardous expectations about a two-tiered market, national and international. The building frenzy had been increasingly supported by banking institutions and above all by savings and loans institutions, active in collecting households savings and granting mortgage loans. Badly managed, lacking equity, they proved very sensible to private interests and political pressures. The real estate crisis inflated their balance sheets with overvalued and illiquid assets. The political remedy, the “bankarization” of savings and loans, avoids bankruptcies but shifts the crisis consequences to new entities, such as Bankia. The collapse of real estate and the financial crisis have broadened the spectrum of the crisis with regard to public budgets,the Spanish economy and society. Politicians appear as powerless as unable to renew their thinking on the economic growth.

Despite the broad range of motivations of household saving which were alternately mentioned during a period of more than two centuries, one was constantly ignored: the loan repayment. The explanation for such an omission is simple: the lack of information on the amount of these repayments. A particularly serious gap in our knowledge at a time where household liability has become so large in many developed countries. The available financial statistics allow nevertheless estimations of these repayments over the period 2004-2011 for five euro area countries and the euro area itself. In France, these repayments could amount to nearly two-fifths of the current household saving of national accounts. This proportion probably varies strongly from one country to another and could have a significant influence on the level of saving rates, a factor never taken into account in international comparisons.

France must simultaneously cut her budget deficit and rebuild her competitiveness to increase economic growth in the medium term. How can we reconcile these conflicting objectives in terms of public finance? Can tax policy be used to reach both objectives?

High Frequency Trading (HFT) refers to investment strategies where algorithms simultaneously handle data extraction and analysis and portfolio updating at an ever-increasing pace, presently below the microsecond. Empirical evidence suggests HFTbrings benefits in terms of price efficiency and market liquidity. HFT also calls for a regulatory response to the extent it generates externalities on other market participants and can amplify market disruptions. Faced with HFT, both supervisory toolkit and regulatory doctrine should be upgraded. In order to maintain market stability, integrity and fairness, regulators should embrace a broad approach that encompasses high frequency traders, their potential counterparties and trading venues.