Bank Networks and Acquisitions

Management Science, 2019

46 Pages Posted: 8 Aug 2019

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Zigan Wang

The University of Hong Kong - School of Economics and Finance; Columbia University

Date Written: January 5, 2019

Abstract

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

Levine, Ross Eric and Lin, Chen and Wang, Zigan, Bank Networks and Acquisitions (January 5, 2019). Management Science, 2019. Available at SSRN: https://ssrn.com/abstract=3432249 or http://dx.doi.org/10.2139/ssrn.3432249

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Zigan Wang (Contact Author)

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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