Bank Networks and Acquisitions
Management Science, 2019
46 Pages Posted: 8 Aug 2019
Date Written: January 5, 2019
Does the pre-deal geographic overlap of the branches of two banks affect the probability that they merge, post-announcement stock returns, and post-merger performance? We compile information on U.S. bank acquisitions from 1984 through 2016, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater pre-deal network overlap (1) increases the likelihood that two banks merge, (2) boosts the cumulative abnormal returns of the acquirer, target, and combined banks, and (3) reduces employment, boosts revenues, reduces the number of branches, improves loan quality, and expedites executive turnover.
Keywords: Mergers and Acquisitions; Value Creation; Synergies
JEL Classification: G34; G21; G28
Suggested Citation: Suggested Citation