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Productivity-conditioned market reaction of US Bank acquisitions during regulation-deregulation eras


This study investigates whether the market can detect the productivity changes in US bank acquirers during the deregulation of the 1990s and the regulation in the aftermath of the 2008 financial crisis. We find that the market reacts negatively to acquisitions that resulted in productivity decline -especially for medium acquirers- but they show no market reaction to acquisitions that resulted in productivity increase. Moreover, the market reflects the characteristics of the deals, like a target's relative size, profitability, and percentage of short-term stock financing, while it reacts to the possible changes in productivity over longer horizons. These results apply to the deregulation and regulation periods but with longer delays in the market reactions to productivity changes and more persistence in the characteristics of deals across all event windows in the deregulation period. The practical implication for acquirer banks’ is that, besides analyzing acquisition characteristics (such as the target’s profitability, relative size, and leverage), its management has to monitor the bank’s productivity and take actions on any productivity decline.

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The datasets generated during and/or analysed during the current study are available from the corresponding author on reasonable request.


  1. Examples of MPI applications cited in this study include (but are not limited to) Isik and Hassan 2003; Banker and Natarajan 2008; Banker et al. 2010; Sufian and Kamarudin 2014; Aghimien et al. 2016; Sufian and Kamarudin 2016; Degl’Innocenti et al. 2017; Sufian (2017); Tanna et al. 2017; Walheer 2018a, b; Al-Khasawneh et al. 2020; Hussain et al. 2020a; Chaffai 2021; Li et al. 2021.


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Correspondence to Naceur Essaddam.

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Al-Khasawneh, J.A., Essaddam, N., Nusair, S.A. et al. Productivity-conditioned market reaction of US Bank acquisitions during regulation-deregulation eras. J Econ Finan (2022).

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  • Malmquist productivity index
  • US banking sector
  • Event study
  • Data Envelopment Analysis (DEA)

JEL Classification

  • D61
  • G21
  • D21
  • G2
  • N25
  • C14
  • C24