Interstate bank mergers: the early evidence

Interstate bank mergers: the early evidence

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Article ID: iaor201522905
Volume: 10
Issue: 4
Start Page Number: 305
End Page Number: 313
Publication Date: Dec 1987
Journal: Journal of Financial Research
Authors: ,
Keywords: finance & banking, economics
Abstract:

This study examines the wealth effects of interstate bank mergers to both the acquired and acquiring firms' shareholders. While the overall results are consistent with the findings of research on nonfinancial mergers – that acquired firms' shareholders gain and acquiring firms' shareholders break even – there is evidence that the acquiring banks cannot be considered a homogeneous group. Specifically, banks involved in relatively large acquisitions earn positive and statistically significant abnormal returns and significantly outperform those involved in relatively smaller mergers. The results suggest there are differential opportunities for gain from interstate mergers, dependent upon the relative size of the acquisition and the degree to which it expands the geographic market served by the bank.

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