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Regulatory Asset Thresholds and Acquisition Activity in the Banking Industry

43 Pages Posted: 3 Feb 2017 Last revised: 20 Jun 2017

Hailey B. Ballew

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Michael Iselin

University of Minnesota - Twin Cities - Department of Accounting

Allison Nicoletti

University of Pennsylvania - Accounting Department

Date Written: June 16, 2017

Abstract

This paper examines how the announcement of new regulations that require significant compliance costs for banks above the $10 billion asset threshold imposed by the Dodd-Frank Act affects acquisition activity in the banking industry. We argue that the additional compliance costs increase the demand for acquisition activity by banks approaching and just above the threshold. We document that after the announcement of the additional regulations, these banks 1) become more likely to engage in an acquisition; and 2) pay larger deal premiums for these acquisitions. Additionally, we find that the relative size of target banks increases for acquisitions made by banks right around the threshold after the announcement of the regulations. These findings suggest that implementing regulations that require significant compliance costs only on banks above specific asset thresholds can contribute to consolidation in the banking industry.

Keywords: Banks, Regulation, Asset Thresholds, Acquisitions, Dodd-Frank

JEL Classification: G21, G28, G34, M40

Suggested Citation

Ballew, Hailey B. and Iselin, Michael and Nicoletti, Allison, Regulatory Asset Thresholds and Acquisition Activity in the Banking Industry (June 16, 2017). 28th Annual Conference on Financial Economics and Accounting. Available at SSRN: https://ssrn.com/abstract=2910440 or http://dx.doi.org/10.2139/ssrn.2910440

Hailey Ballew

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Michael Iselin (Contact Author)

University of Minnesota - Twin Cities - Department of Accounting ( email )

271 19th Avenue South
Room 645 Mgt. Econ. Building
Minneapolis, MN 55455
United States

Allison Nicoletti

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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