Bidder Returns and Merger Anticipation: Evidence from Banking Deregulation

37 Pages Posted: 20 May 2008 Last revised: 10 Aug 2008


This paper examines the anticipated components of bidder returns by focusing on the banking industry around the passage of interstate deregulation (Riegle Neal Act of 1994). Overall, firms that became bidders after Riegle Neal have large significant positive returns during its passage. Moreover, these positive wealth effects are significantly larger than the effects at the merger announcement. These results suggest that bidder returns are anticipated and focusing only on narrow event windows underestimates gains to bidders. Finally, the positive bidder returns appear to provide evidence against both the entrenchment and hubris hypotheses. Additional tests provide evidence to suggest that mergers are motivated by synergy rather than disciplinary motives.

Keywords: Merger returns, Anticipation, Deregulation, Banking

JEL Classification: G28, G14, G21, G34

Suggested Citation

Becher, David, Bidder Returns and Merger Anticipation: Evidence from Banking Deregulation. Journal of Corporate Finance, Forthcoming. Available at SSRN:

David Becher (Contact Author)

Drexel University ( email )

3220 Market Street
1127 Gerri C LeBow Hall
Philadelphia, PA 19104
United States
215-895-2274 (Phone)
215-895-2295 (Fax)

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