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The Impact of Merger Legislation on Bank Mergers


Ongena, Steven; Carletti, Elena; Siedlarek, Jan-Peter; Spagnolo, Giancarlo (2016). The Impact of Merger Legislation on Bank Mergers. Swiss Finance Institute Research Paper 16-33, University of Zurich.

Abstract

We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.

Abstract

We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:18 May 2016
Deposited On:10 Nov 2016 07:56
Last Modified:26 Jul 2018 05:19
Series Name:Swiss Finance Institute Research Paper
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Official URL:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2782040
Other Identification Number:merlin-id:13534

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