Consolidation and Value Creation in the Insurance Industry: the Role of Governance

We examine the long run performance of M&A transactions in the property-liability insurance industry. We specifically investigate whether such transactions create value for the bidders' shareholders and assess how corporate governance mechanisms affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after three years. While tender offers appear to be more profitable than mergers, our evidence does not support the conjecture that domestic transactions create more value than cross border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is better. Internal corporate governance mechanisms are also significant determinants of the performance of bidders.