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Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?

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Author Info
Kane, Edward J
Abstract

Methodologically, this paper frames the opportunity cost of any merger as the value of the alternative deals it precludes or defers. This challenges the standard event-study hypothesis that stock markets benchmark the value of a merger deal by the profits the partners would have earned in stand-alone activity. Substantively, the paper finds that megamergers in banking show two size-related exceptions to the prototypical result that acquirer stock value tends to be unaffected or to fall when a merger is announced. Giant U.S. banking organizations gain value from becoming more gigantic and gain additional value when they absorb an in-state competitor.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 32 (2000)
Issue (Month): 3 (August)
Pages: 671-701
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Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:3:p:671-701

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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