Does Long-Term Performance of Mergers Match Market Expectations? Evidence from the U.S. Banking Industry

Financial Management, Vol. 32, No. 2, Summer 2003

Posted: 11 Jun 2003

See all articles by Gayle L. DeLong

Gayle L. DeLong

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Abstract

There is a paradox in bank mergers. On average, bank mergers do not create value, yet they continue to occur. Using cross sectional analysis to examine 54 bank mergers announced between 1991 and 1995, I test several facets of focus and diversification. Upon announcement, the market rewards the mergers of partners that focus their geography and activities and earnings streams. Only one of these facets, focusing earnings streams, enhances long term performance. Two other circumstances improve long term performance: When a merger involves a relatively inefficient acquirer and when partners reduce bankruptcy costs.

Suggested Citation

DeLong, Gayle L., Does Long-Term Performance of Mergers Match Market Expectations? Evidence from the U.S. Banking Industry. Financial Management, Vol. 32, No. 2, Summer 2003, Available at SSRN: https://ssrn.com/abstract=410363

Gayle L. DeLong (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

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HOME PAGE: http://faculty.baruch.cuny.edu/gdelong

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