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Impact of Bank Mergers on Shareholders’ Wealth: A Review of Literature

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Author Info

  • Odero Naor Juma

    (Masinde Muliro University of Science and Technology)

  • Peter T. Wawire

    (Masinde Muliro University of Science and Technology)

  • John Byaruhanga

    (Masinde Muliro University of Science and Technology)

  • Ochieng Okaka

    (Masinde Muliro University of Science and Technology)

  • Odhiambo Odera

    ()
    (Masinde Muliro University of Science and Technology)

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    Abstract

    The main motive of any Merger and Acquisitions (M&As) is to increase of the wealth for the shareholders which in turn forms the main goal of any firm. The main categories of motives identified include those that increase shareholder value and those that destroy shareholder value. Motives which increase shareholder value include; synergy, achievement of economies of scale and scope, increased market power and revenue growth, improvement of managerial efficiency. Motives which decrease shareholder value include managerial hubris, agency and diversification. There are three main types of M&As which are horizontal, vertical and conglomerate. The study lastly examines the methods of financing M&As, the relative size and the number of bidders of the target firms.

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    Bibliographic Info

    Article provided by Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences in its journal International Journal of Academic Research in Accounting, Finance and Management Sciences.

    Volume (Year): 2 (2012)
    Issue (Month): 4 (October)
    Pages: 162-172

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    Handle: RePEc:hur:ijaraf:v:2:y:2012:i:4:p:162-172

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    Web page: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal

    Related research

    Keywords: Mergers; acquisitions; organisational factors;

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    References

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    1. Becher, David A., 2000. "The valuation effects of bank mergers," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 189-214, July.
    2. Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
    3. Adel Al-Sharkas & M. Hassan, 2010. "New evidence on shareholder wealth effects in bank mergers during 1980-2000," Journal of Economics and Finance, Springer, vol. 34(3), pages 326-348, July.
    4. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    5. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
    6. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, vol. 36(2), pages 87-110, December.
    7. Caves, Richard E., 1989. "Mergers, takeovers, and economic efficiency : Foresight vs. hindsight," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 151-174, March.
    8. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, vol. 37(1), pages 39-65, January.
    9. Saeyoung Chang, 1998. "Takeovers of Privately Held Targets, Methods of Payment, and Bidder Returns," Journal of Finance, American Finance Association, vol. 53(2), pages 773-784, 04.
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