The Impact of Merger Legislation on Bank Mergers
46 Pages Posted: 15 Jun 2016 Last revised: 10 Oct 2019
Date Written: July 19, 2017
We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers, and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks, and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.
Keywords: banks, mergers and acquisitions, merger control, antitrust
JEL Classification: G21, G34, K21, L40
Suggested Citation: Suggested Citation