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Corporate governance of bank mergers

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Author Info
David A. Becher
Terry L. Campbell II
Abstract

By investigating the extent to which target directors bargain in their own interests during negotiations between merging banks, we document a strong inverse relation between merger premium and target director retention. This relation holds for both executive (inside) directors and independent outside directors, and other governance mechanisms of targets and bidders fail to diminish this finding. Moreover, individual target director retention is conditioned by the relative size but not by prior target performance. Overall, our results suggest some target directors exercise their bargaining power with the acquirer in a manner counter to the interests of their shareholders during merger negotiations.

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Article provided by Federal Reserve Bank of Chicago in its journal Proceedings.

Volume (Year): (2004)
Issue (Month): May ()
Pages: 267-287
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Handle: RePEc:fip:fedhpr:y:2004:i:may:p:267-287

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Keywords: Corporate governance Bank mergers

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    Other versions:
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