IDEAS home Printed from https://ideas.repec.org/p/wop/pennin/97-07.html
   My bibliography  Save this paper

The Value Effects of Bank Mergers and Acquisitions

Author

Listed:
  • Steven J. Pilloff
  • Anthony M. Santomero

Abstract

The banking industry has experienced an unprecedented level of consolidation on a belief that gains can accrue through expense reduction, increased market power, reduced earnings volatility, and scale and scope economies. A review of the literature suggests that the value gains that are alleged have not been verified. The paper then seeks to address alternative explanations and reconcile the data with continued merger activity.

Suggested Citation

  • Steven J. Pilloff & Anthony M. Santomero, 1996. "The Value Effects of Bank Mergers and Acquisitions," Center for Financial Institutions Working Papers 97-07, Wharton School Center for Financial Institutions, University of Pennsylvania.
    • Handle: RePEc:wop:pennin:97-07
    as

    Download full text from publisher

    File URL: http://fic.wharton.upenn.edu/fic/papers/97/9707.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Madura, Jeff & Wiant, Kenneth J., 1994. "Long-term valuation effects of bank acquisitions," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1135-1154, December.
    2. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, "undated". "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Finance and Economics Discussion Series 1997-09, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    3. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 117-148, August.
    4. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
    5. Allen N. Berger & David B. Humphrey, 1994. "Bank scale economies, mergers, concentration, and efficiency: the U.S. experience," Finance and Economics Discussion Series 94-23, Board of Governors of the Federal Reserve System (U.S.).
    6. Berger, Allen N. & Hunter, William C. & Timme, Stephen G., 1993. "The efficiency of financial institutions: A review and preview of research past, present and future," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 221-249, April.
    7. Berger, Allen N. & Hanweck, Gerald A. & Humphrey, David B., 1987. "Competitive viability in banking : Scale, scope, and product mix economies," Journal of Monetary Economics, Elsevier, vol. 20(3), pages 501-520, December.
    8. Frei, F.X. & Harker, P.T., 1996. "Measuring the Efficiency of Service Delivery Processes: With Application to Retail Banking," Papers 96-04, Rochester, Business - Operations Management.
    9. Aruna Srinivasan & Larry D. Wall, 1992. "Cost savings associated with bank mergers," FRB Atlanta Working Paper 92-2, Federal Reserve Bank of Atlanta.
    10. Allen N. Berger & David B. Humphrey, 1992. "Megamergers in banking and the use of cost efficiency as an antitrust defense," Finance and Economics Discussion Series 203, Board of Governors of the Federal Reserve System (U.S.).
    11. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    12. Aruna Srinivasan, 1992. "Are there cost savings from bank mergers?," Economic Review, Federal Reserve Bank of Atlanta, issue Mar, pages 17-28.
    13. Frances X. Frei & Patrick T. Harker & Larry W. Hunter, 1995. "Performance in Consumer Financial Services Organizations: Framework and Results from the Pilot Study," Center for Financial Institutions Working Papers 95-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
    14. David B. Humphrey, 1990. "Why do estimates of bank scale economies differ?," Economic Review, Federal Reserve Bank of Richmond, vol. 76(Sep), pages 38-50.
    15. Jeffrey A. Clark, 1988. "Economies of scale and scope at depository financial institutions: a review of the literature," Economic Review, Federal Reserve Bank of Kansas City, vol. 73(Sep), pages 16-33.
    16. Cornett, Marcia Millon & Tehranian, Hassan, 1992. "Changes in corporate performance associated with bank acquisitions," Journal of Financial Economics, Elsevier, vol. 31(2), pages 211-234, April.
    17. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    18. Timothy H. Hannan & John D. Wolken, 1989. "Returns to bidders and targets in the acquisition process: evidence from the banking industry," Finance and Economics Discussion Series 64, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hughes, Joseph P. & Lang, William W. & Mester, Loretta J. & Moon, Choon-Geol, 1999. "The dollars and sense of bank consolidation," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 291-324, February.
    2. Chong, Beng-Soon & Liu, Ming-Hua & Tan, Kok-Hui, 2006. "The wealth effect of forced bank mergers and cronyism," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3215-3233, November.
    3. Lamberte, Mario B. & Manlagnit, Ma. Chelo V., 2004. "Evaluating the Impacts of Competition Policy Reforms on the Efficiency of Philippine Commercial Banks," Discussion Papers DP 2004-46, Philippine Institute for Development Studies.
    4. Beniamino Callegari, 2018. "The finance/innovation nexus in Schumpeterian analysis: theory and application to the case of U.S. trustified capitalism," Journal of Evolutionary Economics, Springer, vol. 28(5), pages 1175-1198, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    2. Allen N. Berger & David B. Humphrey, 1994. "Bank scale economies, mergers, concentration, and efficiency: the U.S. experience," Finance and Economics Discussion Series 94-23, Board of Governors of the Federal Reserve System (U.S.).
    3. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
    4. Avkiran, Necmi Kemal, 1999. "The evidence on efficiency gains: The role of mergers and the benefits to the public," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 991-1013, July.
    5. van Oppen, C.A.M.L. & Odekerken-Schröder, G.J. & Wetzels, M.G.M., 2005. "Experiential value: a hierarchical model, the impact on e-loyalty and a customer typology," Research Memorandum 017, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Dimitris Chronopoulos & Claudia Girardone & John Nankervis, 2013. "How Do Stock Markets in the US and Europe Price Efficiency Gains from Bank M&As?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(3), pages 243-263, June.
    7. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, "undated". "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Finance and Economics Discussion Series 1997-09, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    8. Fakarudin Kamarudin & Bany Ariffin Amin Nordin & Junaina Muhammad & Mohamad Ali Abdul Hamid, 2014. "Cost, Revenue and Profit Efficiency of Islamic and Conventional Banking Sector: Empirical Evidence from Gulf Cooperative Council Countries," Global Business Review, International Management Institute, vol. 15(1), pages 1-24, March.
    9. José Luis Carreño & Gino Loyola & Yolanda Portilla, 2010. "Eficiencia Bancaria en Chile: un Enfoque de Frontera de Beneficios," Working Papers Central Bank of Chile 603, Central Bank of Chile.
    10. Fung, Michael K. & Cheng, Arnold C.S., 2010. "Convergence of total factor productivity among banks: Hong Kong's experience," Global Finance Journal, Elsevier, vol. 21(2), pages 201-210.
    11. Theodor Kohers & Ming‐hsiang Huang & Ninon Kohers, 2000. "Market perception of efficiency in bank holding company mergers: the roles of the DEA and SFA models in capturing merger potential," Review of Financial Economics, John Wiley & Sons, vol. 9(2), pages 101-120, December.
    12. Berger, Allen N., 2003. "The efficiency effects of a single market for financial services in Europe," European Journal of Operational Research, Elsevier, vol. 150(3), pages 466-481, November.
    13. Kohers, Theodor & Huang, Ming-hsiang & Kohers, Ninon, 2000. "Market perception of efficiency in bank holding company mergers: the roles of the DEA and SFA models in capturing merger potential," Review of Financial Economics, Elsevier, vol. 9(2), pages 101-120, December.
    14. Robert DeYoung, 1998. "Management Quality and X-Inefficiency in National Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 13(1), pages 5-22, February.
    15. Rezvanian, Rasoul & Mehdian, Seyed, 2002. "An examination of cost structure and production performance of commercial banks in Singapore," Journal of Banking & Finance, Elsevier, vol. 26(1), pages 79-98, January.
    16. David C. Wheelock & Paul W. Wilson, 2000. "Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 127-138, February.
    17. Fung, Michael K., 2006. "Are labor-saving technologies lowering employment in the banking industry?," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 179-198, January.
    18. Kiymaz, Halil, 2004. "Cross-border acquisitions of US financial institutions: Impact of macroeconomic factors," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1413-1439, June.
    19. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    20. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:pennin:97-07. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/fiupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.