The Effectof the Restructuring Process on Economic Value Creation: The Case of the Spanish Banking Sector

Leonor Lopez Maynar & Víctor Moré Coloma

Student thesis: Master thesis


The impact of the financial crisis on the Spanish banking sector has led to a wave of mergers and acquisitions whose aim has been to restore financial stability. In this context, a large number of savings banks (or cajas as they are known in Spain) disappeared as the result of a restructuring process that began in 2010, while, those that remained had to undergo a change to their legal status and operate under the legal form of a corporate bank. To complete this intense and challenging process, the equivalent of 9.6% of the GDP in public aid was utilized between 2008 and 20141 2 and 25% of jobs in the sector had been destroyed by November 2015.3 In this sense, the quantitative and qualitative changes in the Spanish banking industry fully justify, on socioeconomic grounds, an investigation into the outcome of the restructuring process. There is a long list of metrics that could be used to evaluate the performance of banks after the restructuring, from a social and from a purely financial point of view. This dissertation has opted to use an economic metric of value creation. Specifically, we measure value by means of Economic Value Added Spread (EVAS), a relative measure of economic value creation that is arguably a superior metric of performance than traditional accounting measures. In order to conduct the analysis, we divide banks and cajas into two clusters: one that includes credit institutions that merged, and another comprised of entities that did not do so. In this context, we aim to observe differences in value creation between the two clusters and, before and after the start of the restructuring process. This will set the bases for our final objective: to assess whether the restructuring process led to merged banks and cajas creating or destroying economic value. For this purpose, we rely on a panel dataset that includes data related to EVAS (the dependent variable), bankspecific variables, macroeconomic variables and dummy variables between 2006 and 2014. More specifically, we rely on the Differences-in-Differences (DID) Modeling approach to observe differences between groups (interaction effects). Our results show significant differences between merged and non-merged banks. While merged banks were, on average, more efficient, better financed, larger and possessed a better asset structure after the restructuring process, non-merged banks held better quality assets, were better capitalized and more diversified. However, bank size, asset quality and funding were found to be not significant and hence do not explain changes in EVAS. Moreover, the analysis suggests that merged institutions were unable to create value as a result of the restructuring process, ceteris paribus. Thus, from an EVA point of view and according to the data at our disposal, we do not see evidence of value creation among merged institutions due to the restructuring. In fact, we see signs that the restructuring process may have caused merged institutions to destroy economic value. Keywords: Restructuring process; Mergers; Acquisitions; Economic value added; Spanish banking sector.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final ThesisMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages130
SupervisorsSøren Plesner