Gains in Bank Mergers: Evidence from the Bond Markets

Posted: 27 Jun 2005

See all articles by María Fabiana Penas

María Fabiana Penas

Universidad Torcuato Di Tella

Haluk Unal

University of Maryland - Robert H. Smith School of Business

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Abstract

We present evidence that the adjusted returns of merging banks' bonds are positive and significant across pre-merger and announcement months. The cross-sectional evidence indicates that the primary determinants of merger-related bondholder gains are diversification gains, gains associated with achieving too-big-to-fail status, and, to a lesser degree, synergy gains. We obtain the same finding when we examine the acquiring banks' credit spreads on new debt issues both before and after the merger. We also provide the first study that shows acquirers benefit by the lower cost of funds on post-merger debt issues.

Keywords: Bank mergers, bond markets, diversification, too big to fail

JEL Classification: G21, G28, G34

Suggested Citation

Penas, María Fabiana and Unal, Haluk, Gains in Bank Mergers: Evidence from the Bond Markets. Available at SSRN: https://ssrn.com/abstract=706503

María Fabiana Penas (Contact Author)

Universidad Torcuato Di Tella ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Haluk Unal

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-2256 (Phone)
301-405 0359 (Fax)

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