Incentives for banking megamergers: what motives might regulations infer from event-study evidence?

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  • 1 January 2000
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      • Published in RePEc
Abstract
Methodologically, this paper frames the opportunity cost of any merger as the value of the alternative deals it precludes or defers. This challenges the standard event-study hypothesis that stock markets benchmark the value of a merger deal by the profits the partners would have earned in stand-alone activity. Substantively, the paper finds that megamergers in banking show two size-related exceptions to the prototypical result that acquirer stock value tends to be unaffected or to fall when a merger is announced. Giant U.S. banking organizations gain value from becoming more gigantic and gain additional value when they absorb an in-state competitor. (This abstract was borrowed from another version of this item.)
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