Information Technology and Integration Effects on Merger Value in the U.S. Commercial Banking Industry

33 Pages Posted: 4 Feb 2013

See all articles by Ali R. Tafti

Ali R. Tafti

University of Illinois at Chicago

Date Written: February 2, 2013

Abstract

We study the effect of information technology (IT) investment and merger integration on the value derived from 118 mergers in the U.S. banking industry. We quantify integration depth based on expenditures in merger-related integration, and examine how pre-merger IT intensity of the acquiring firm moderates the effect of merger-integration depth on firm performance. The effect of IT intensity becomes increasingly positive in mergers involving a large depth of integration. We also measure anticipated integration difficulty using information reported publicly prior to the merger effective date. IT intensity of the acquiring firm has a positive moderating influence in the effect of anticipated integration difficulty on the stock market reaction to merger announcements. We discuss the results in light of existing theory and cases from the banking industry press.

Keywords: Information Technology, Integration, Mergers and Acquisitions (M&A), Banks, Firm Performance, Cumulative Abnormal Returns

JEL Classification: L10, L14, M10, M20, M21

Suggested Citation

Tafti, Ali R., Information Technology and Integration Effects on Merger Value in the U.S. Commercial Banking Industry (February 2, 2013). Available at SSRN: https://ssrn.com/abstract=2210957 or http://dx.doi.org/10.2139/ssrn.2210957

Ali R. Tafti (Contact Author)

University of Illinois at Chicago ( email )

601 S Morgan St, 2403 University Hall, MC 294
Chicago, IL 60607
United States

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