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The wealth effects of bank acquisitions

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  • Arphaphan Chavaltanpipat
  • Shady Kholdy
  • Ahmad Sohrabian
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    Abstract

    The purpose of the study is to investigate whether trends in banking mergers between January 1994 and October 1995 are different from previous periods. Specifically, the study focused on greatly increased acquisition prices and interstate consolidations. Abnormal returns and cumulative abnormal returns for a sample of 30 mergers were determined for each situation. The results of the study showed negative effects for shareholders of acquiring banks around the announcement period. Medium-to-small acquisitions, under $1 billion, caused insignificant negative abnormal returns, but large acquisitions, over $1 billion, caused significant negative abnormal returns. At the same time, shareholders in acquired banks of both sizes earned significant positive abnormal returns. The most dramatic discovery was that the larger acquisition price, the higher the target returns. The analysis of interstate mergers showed similar results. The analysis documented significant positive abnormal returns for target banks and insignificant negative abnormal returns for acquiring banks during the announcement.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 6 (1999)
    Issue (Month): 1 ()
    Pages: 5-11

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    Handle: RePEc:taf:apeclt:v:6:y:1999:i:1:p:5-11

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    Cited by:
    1. Ahmed Mohamed Badreldin & Christian Kalhoefer, 2009. "The Effect of Mergers and Acquisitions on Bank Performance in Egypt," Working Papers 18, The German University in Cairo, Faculty of Management Technology.

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