, Volume 36, Issue 2-3, pp 87-110
Date: 24 Jul 2009

Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature

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This paper provides a review of the recent financial institution mergers and acquisition (M&A) literature covering over 150 studies. Several robust themes emerge in the post-2000 literature. North American bank mergers are (or can be) efficiency improving, although the event-study literature presents a mixed picture regarding stockholder wealth creation. In contrast, European bank mergers appear to have resulted in both efficiency gains and stockholder value enhancement. There is robust evidence linking high CEO compensation to merger activity and strong implications that deals can be motivated by the desire to obtain ‘too-big-to-fail’ status and reap the associated subsidies. Evidence on the impact of both geographic and product diversification via merger is mixed. There is growing evidence that financial institution M&As can adversely impact certain types of borrowers, depositors, and other external stakeholders.

This paper has benefited from valuable insights from a large number of individuals. We would particularly like to thank Robert Adams, Yener Altunbas, Rym Ayadi, Santiago Carbo, Barbara Casu, Ken Cyree, Franco Fiordelisi, Regina Frank Claudia Girardone, John Goddard, Ken Jones, Ximo Maudos, David Marquez, Fabio Panetta, Evren Ors, Fotios Pasiouras, Klaus Schaek, Jon Williams and John Wilson. All remaining errors, as usual, rest with the authors.