Bank Mergers, REIT Loan Pricing and Takeover Likelihood

40 Pages Posted: 29 Jul 2008

See all articles by William G. Hardin

William G. Hardin

Florida International University (FIU) - College of Business Administration

Zhonghua Wu

Florida International University (FIU)

Date Written: December 1, 2008

Abstract

The impact of bank mergers on REIT loan pricing and takeover likelihood is assessed. REITs that lose their primary banking relationship due to bank mergers pay higher interest rates on future borrowings. Bank consolidation reduces bank competition for REIT loans which affects loan pricing. Moreover, based on randomly matched samples of REITs, the results imply that firms losing their agent banks due to bank mergers and those with limited access to bank debt are more likely to be acquired while REITs associated with acquiring banks are more likely to acquire other firms. Additional analysis of the 92 merged REITs reveals that 33% of the target REITs' banks are merged with their REIT acquirers' banks prior to the REIT mergers while 67% of the target REITs share at least one major bank with their acquirer.

Keywords: Bank Mergers, Loan Pricing, Takeover Likelihood

Suggested Citation

Hardin, William G. and Wu, Zhonghua, Bank Mergers, REIT Loan Pricing and Takeover Likelihood (December 1, 2008). Journal of Real Estate Finance and Economics, Vol. 38, No. 3, 2009, Available at SSRN: https://ssrn.com/abstract=1179782

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Zhonghua Wu (Contact Author)

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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