Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As

71 Pages Posted: 27 Oct 2004

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

Robert DeYoung

University of Kansas School of Business

Date Written: October 2004

Abstract

We offer a new explanation for why academic studies typically fail to find value creation in bank mergers. Our conjectures are predicated on the idea that, until recently, large bank acquisitions were a new phenomenon, with no best practices history to inform bank managers or market investors. We hypothesize that merging banks, and investors pricing bank mergers, "learn-by-observing" information that spills over from previous bank mergers. We find evidence consistent with these conjectures for 216 M&As of large, publicly traded U.S. commercial banks between 1987 and 1999. These findings are consistent with semi-strong stock market efficiency.

Keywords: Mergers, learning, information spillover, banks, market efficiency

JEL Classification: G14, G21, G28, G34

Suggested Citation

DeLong, Gayle L. and DeYoung, Robert, Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As (October 2004). FRB of Chicago Working Paper No. 2004-17, Available at SSRN: https://ssrn.com/abstract=609925 or http://dx.doi.org/10.2139/ssrn.609925

Gayle L. DeLong (Contact Author)

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

One Bernard Baruch Way
Box B 10-225
New York, NY 10010
United States
646-312-3493 (Phone)
646-312-3451 (Fax)

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

Robert DeYoung

University of Kansas School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-1806 (Phone)

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