Bank M&A: A Market Power Story?

Posted: 27 Sep 2009 Last revised: 29 May 2012

See all articles by Yassin Hankir

Yassin Hankir

Frankfurt School of Finance & Management - FIPEMA

Christian Rauch

American University of Sharjah

Marc P. Umber

Frankfurt School of Finance & Management

Date Written: July 9, 2009

Abstract

This paper analyzes capital market reactions to international bank M&A. We investigate the combined stock return patterns of targets, bidders, and their peers upon takeover announcement, and closing or withdrawal. We distinguish five common M&A hypotheses and relate characteristic and mutually exclusive abnormal stock return patterns to each hypothesis. The findings show that there are more investors who believe in gains through the exploitation of market power by the post-merger entity than investors who believe in any of the other motives tested in the paper. In a multinomial logistic model we show that patterns related to market power significantly concur with large relative target size, intra-industry mergers, and increasing market concentration, suggesting a substantial lessening of competition through M&A.

Keywords: M&A, Banks, Event Study, Peer Returns, Market Power

JEL Classification: G34, G21, G14, L13

Suggested Citation

Hankir, Yassin and Rauch, Christian and Umber, Marc P., Bank M&A: A Market Power Story? (July 9, 2009). Journal of Banking and Finance, Vol. 35, No. 9, 2011. Available at SSRN: https://ssrn.com/abstract=1478831

Yassin Hankir

Frankfurt School of Finance & Management - FIPEMA ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany
+49-69-154008-389 (Phone)
+49-69-154008-388 (Fax)

HOME PAGE: http://www.frankfurt-school.de/fipema

Christian Rauch

American University of Sharjah ( email )

P.O. Box 26666
University City
Sharjah, Greater Dubai Area
United Arab Emirates

Marc P. Umber (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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