Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?

55 Pages Posted: 21 Apr 2000

See all articles by Edward J. Kane

Edward J. Kane

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: 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.

JEL Classification: G14, G21, G34

Suggested Citation

Kane, Edward J., Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence? (January 25, 2000). Available at SSRN: https://ssrn.com/abstract=221708 or http://dx.doi.org/10.2139/ssrn.221708

Edward J. Kane (Contact Author)

Boston College - Department of Finance ( email )

Fulton Hall
Chestnut Hill, MA 02467
United States
520-299-5066 (Phone)
617-552-0431 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
662
rank
37,748
Abstract Views
2,727
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information