Do Mergers and Acquisitions Add Shareholder Value - An Empirical Event Study of the American and European Airline Industries

This study investigates and compares the value added by merger and acquisition activity within the airline industries of the United States of America and Europe following the deregulation of each respective market. An abnormal return event study methodology was performed with three different event window lengths using a final sample of 64 public airline mergers. The focus of the study was on abnormal returns generated to shareholders of the acquiring firm. In the case of true mergers, where an acquiring firm could not be identified, a weighted average approach was adopted. To test the robustness of the results, the analysis was repeated using two alternate regional reference portfolios, which resulted in no significant changes in the underlying economic relationships. The findings infer a statistically significant positive abnormal shareholder return following airline mergers and acquisitions of 2.4%. The results also showed an American outperformance of approximately 1.4%, albeit with a lack of statistical significance.