A New Application of Sustainable Growth: A Multi-Dimensional Framework for Evaluating the Long Run Performance of Bank Mergers

19 Pages Posted: 26 Dec 2005

See all articles by Gerard T. Olson

Gerard T. Olson

Villanova University - School of Business

Michael S. Pagano

Villanova University - Villanova School of Business

Abstract

We study the mergers of US publicly traded bank holding companies during 1987-2000 and find that the acquiring firm's sustainable growth rate is an important determinant of the cross-sectional variation in the merged entity's long-term operating and stock performance. The most economically significant determinants of the merged bank's abnormal stock return performance are the acquiring bank's estimated sustainable growth rate prior to the acquisition, as well as post-acquisition changes in this growth rate, and the bank's dividend payout ratio. Our findings are robust even after controlling for several potentially confounding factors.

Suggested Citation

Olson, Gerard T. and Pagano, Michael S., A New Application of Sustainable Growth: A Multi-Dimensional Framework for Evaluating the Long Run Performance of Bank Mergers. Journal of Business Finance & Accounting, Vol. 32, No. 9-10, pp. 1995-2036, November 2005. Available at SSRN: https://ssrn.com/abstract=857618 or http://dx.doi.org/10.1111/j.0306-686X.2005.00656.x

Gerard T. Olson

Villanova University - School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States
610-519-4377 (Phone)

Michael S. Pagano (Contact Author)

Villanova University - Villanova School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States
(610) 519-4389 (Phone)

HOME PAGE: http://www90.homepage.villanova.edu/michael.pagano

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
1,458
PlumX Metrics