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Deal size, bid premium, and gains in bank mergers: The impact of managerial motivations

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Author Info
Atul Gupta (Bently College)
Bently Lalatendu Misra (University of Texas at San Antonio)
Abstract

Do relatively large mergers create more value? Do larger bid amounts represent wealth transfer or do they digmal larger expected merger gains? We hypothedize that the relationship between aggregate merger gains, dela size,and bid premiums is asymmetric across merfers made by value-enhancing versus value-reducing managers. We use a large sample of bank mergers to test these predictions and find that the value response to different explanatory variables is asymmetric. Our findings provide new insights into how theh market values merger bids.

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File URL: http://www.business.utsa.edu/wps/fin/0004FIN-092-2007.pdf
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Publisher Info
Paper provided by College of Business, University of Texas at San Antonio in its series Working Papers with number 0004.

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Length: 42 pages
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Handle: RePEc:tsa:wpaper:0004

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Related research
Keywords: Bank mergers; Managerial motivations; Merger gains;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G20 - Financial Economics - - Financial Institutions and Services - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  1. Kathy Czyrnik & Linda Schmid Klein, 2004. "Who Benefits from Deregulating the Separation of Banking Activities? Differential Effects on Commercial Bank, Investment Bank, and Thrift Stock Returns," The Financial Review, Eastern Finance Association, vol. 39(2), pages 317-341, 05. [Downloadable!] (restricted)
  2. Becher, David A., 2000. "The valuation effects of bank mergers," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 189-214, July. [Downloadable!] (restricted)
  3. Hughes, Joseph P. & Lang, William W. & Mester, Loretta J. & Moon, Choon-Geol & Pagano, Michael S., 2003. "Do bankers sacrifice value to build empires? Managerial incentives, industry consolidation, and financial performance," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 417-447, March. [Downloadable!] (restricted)
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  4. Cornett, Marcia Millon & McNutt, Jamie John & Tehranian, Hassan, 2006. "Performance Changes around Bank Mergers: Revenue Enhancements versus Cost Reductions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1013-1050, June. [Downloadable!] (restricted)
  5. Cornett, Marcia Millon & Hovakimian, Gayane & Palia, Darius & Tehranian, Hassan, 2003. "The impact of the manager-shareholder conflict on acquiring bank returns," Journal of Banking & Finance, Elsevier, vol. 27(1), pages 103-131, January. [Downloadable!] (restricted)
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