Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?
Edward J. Kane
Boston College - Department of Finance; National Bureau of Economic Research (NBER)
January 25, 2000
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.
Number of Pages in PDF File: 55
JEL Classification: G14, G21, G34
working papers series
Suggested Citation
Kane, Edward J., Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence? (January 25, 2000). Available at SSRN: http://ssrn.com/abstract=221708 or http://dx.doi.org/10.2139/ssrn.221708
