Does learning by observing matter for M&As? International evidence from the insurance industry

ABSTRACT This paper examines the role of learning by observing in insurance mergers and acquisitions (M&As) by employing an international sample across 18 countries spanning the years 1990 to 2014. The empirical results support a view of semi-strong market efficiency: the long-run improvements in financial performance and risk profiles are significantly related to past M&As in the insurance industry. Moreover, we find evidence of more accurate stock market predictions of long-run financial performance and risk profiles if there are more recent insurance merger activities. This paper provides a new explanation for the controversy observed in the failure of insurance M&As to create value.