Abstract
This article examines the effects of acquisition announcements of publicly traded banks on stockholder wealth using event-study methodology and an updated and enlarged sample of such banking organizations. The findings imply that on average, acquisitions in the banking industry result in a wealth transfer from the shareholders of bidding firms to the shareholders of target firms, with no overall gain to the shareholders of the two firms combined. Of the characteristics examined, only capitalization of the target firm is found to distinguish between combinations with positive and negative combined wealth effects.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Brown, Stephen J., and Warner, Jerald B. “Using Daily Stock Returns: The Case of Event Studies.”Journal of Financial Economics 14 (1985), 3–31.
Cornett, Marcia M., and De, Sankar. “An Examination of Stock Market Reactions to Interstate Bank Mergers.” Southern Methodist University 1989, (Mimeo).
Dennis, Debra K., and McConnell, John J. “Corporate Mergers and Securities Returns.”Journal of Financial Economics 16 (1986), 143–187.
de Cossio, Francisco, Trifts, Jack W., and Scanlon, Kevin P. “Bank Equity Returns: The Differnce Between Intrastate and Interstate Bank Mergers.” Working Paper, Division of Research, College of Business Administration, University of South Carolina, 1987.
Dodd, Peter. “Merger Proposals, Management Discretion and Stockholder Wealth.”Journal of Financial Economics 8 (1980), 105–38.
Hannan, Timothy H., and Rhoades, Stephen A. “Acquisition Targets and Motives: The Case of the Banking Industry.”Review of Economics and Statistics 69 (February 1987), 67–74.
Jarrell, Gregg A., Brickley, James A., and Netter, Jeffry M. “The Market for Corporate Control: The Empirical Evidence Since 1980.”Journal of Economic Perspectives 2 (Winter 1988), 49–68.
James, Christoper M., and Weir, Peggy. “Determinants of the Division of Gains in Corporate Acquisitions: Evidence from the Banking Industry.” January 1987, (Mimeo).
Langetieg, T. “An Application of a Three-Factor Performance Index to Measure Stockholders Gains from Mergers.”Journal of Financial Economics 6 (1978), 365–383.
Malatesta, Paul H. “The Wealth Effect of Merger Activity and the Objective Functions of Merging Firms.”Journal of Financial Economics 11 (1983), 155–81.
Pettway, Richard H., and Trifts, Jack W. “Do Banks Overbid When Acquiriing Failed Banks?”Financial Management (Summer 1985), 5–15.
Rhoades, Stephen A. “Determinants of Premiums Paid in Bank Acquisitions.”Atlantic Economic Journal 15 (1987), 20–30.
Stolz, Richard W., and Officer, Dennis T. “Financial Denials of Bank Holding Company Applications: The Impact on Bank Stock Pricing.” 1985. (Mimeo)
Trifts, Jack W., and Scanlon, Kevin P. “Interstate Bank Mergers: The Early Evidence.”The Journal of Financial Research 10 (Winter 1987), 305–311.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Hannan, T.H., Wolken, J.D. Returns to bidders and targets in the acquisition process: Evidence from the banking industry. J Finan Serv Res 3, 5–16 (1989). https://doi.org/10.1007/BF00114075
Issue Date:
DOI: https://doi.org/10.1007/BF00114075