Parallel to the development towards European harmonization including the aim of an integrated European capital market, the luxury industry has experienced profound structural changes. No other internationally operating industry might be similarly dominated by European companiesreferring to the European majority among the listed luxury firms, and especially considering the four predominant Europe-headquartered luxury conglomerates. Owing to the expansion strategy of these conglomerates and the overall consolidation trend throughout the luxury industry, numerous Mergers and Acquisitions (M&A) involving luxury firms have taken place. Against the background of an increasing international orientation combined with the sector superiority of European luxury companies, the paper considers luxury M&A to be an appropriate object of investigation concerning the degree of European capital market integration. This study examines the announcement effects of 206 M&A involving luxury companies from 1993-2005. The main results comprise three aspectsprimarily, there are no significant differences in the announcement returns between domestic and cross-border luxury transactionsindicating a high degree of European financial market integration. Moreover, the paper finds significantly positive M&A announcement effects for shareholders of both luxury targets and acquirers. The abnormal returns accruing to target shareholders exceed the ones attributed to acquirer shareholders. Finally, contrasting M&A operations of acquiring luxury conglomerates and non-conglomerate luxury companies reveal that only acquisitions by non-conglomerate luxury firms are associated with significantly positive wealth effects differing significantly from the conglomerate sub-sample.

In times of an increasingly unifying European Union (EU), diminishing barriers and the pursuit of an overall European harmonization, research on questions concerning European capital market integration has been intensified during the past decade. Researchers take different perspectives in order to test the European capital markets for their degree of integration. Since the late 1990s, investigations focusing on either the real capital market integration like De Ménil (1999), the role of financial intermediaries (Buch, 1999), or the capital market interdependence (Pentecost and Holmes, 1995; Moosa and Bhatti, 1996) come to a conclusion that the integration of Europe's financial markets is in progress, but still far from completion.

Oh (2003) provides supporting evidence on widely segmented European capital markets. By means of the formal approval of the European Takeover Directive in 2004, EU politics finally established a universally valid framework with the aim of advancing corporate restructuring and capital market integration. Against this background, it seems worth examining, what conclusions can be presently drawn with regard to European capital market integration.

We refer to the prevalent hypotheses in literature here which postulating that differences in shareholder wealth creation between cross-border and national takeovers might only emerge in the event of market imperfectionssuch as occurring in nationally segmented capital markets. In the case of highly integrated financial markets, wealth creation differences between domestic and transnational takeovers are not expected.

luxury industry, European capital market, Mergers and Acquisitions, M&A, Foreign Direct Investments, FDI, Acquisitions, International stock exchange markets, Initial Public Offering, IPO, European banking sector, Financial services industry, Financial Management.