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Does it pay to acquire private firms? Evidence from the U.S. banking industry

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  • George N. Leledakis
  • Emmanuel C. Mamatzakis
  • Emmanouil G. Pyrgiotakis
  • Nickolaos G. Travlos

Abstract

We extend the U.S. bank M&As literature by examining bidder announcement abnormal returns in deals involving both public and private targets over a 32-years examination period. Our main findings document the existence of a listing effect in our sample. Banks gain when they acquire private firms and lose when they acquire public firms. Gains in private offers are even higher when bidders employ financial advisors, whereas the opposite is true for public deals. We argue that this adverse advisor effect relates to the different levels of information asymmetry between public and private targets. Our results remain robust when we control for usual determinants of bidder abnormal returns, such as the method of payment, size, or relative size and when we control for sample selection and endogeneity problems.

Suggested Citation

  • George N. Leledakis & Emmanuel C. Mamatzakis & Emmanouil G. Pyrgiotakis & Nickolaos G. Travlos, 2021. "Does it pay to acquire private firms? Evidence from the U.S. banking industry," The European Journal of Finance, Taylor & Francis Journals, vol. 27(10), pages 1029-1051, July.
    • Handle: RePEc:taf:eurjfi:v:27:y:2021:i:10:p:1029-1051
    DOI: 10.1080/1351847X.2020.1799835
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    Cited by:

    1. Katsafados, Apostolos G. & Leledakis, George N. & Pyrgiotakis, Emmanouil G. & Androutsopoulos, Ion & Fergadiotis, Manos, 2024. "Machine learning in bank merger prediction: A text-based approach," European Journal of Operational Research, Elsevier, vol. 312(2), pages 783-797.

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