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Geographic strategies in mergers and acquisitions by financial institutions

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  • Jennifer Brodmann
  • Charles Armah Danso
  • Thanh Ngo

Abstract

We examine the impacts of geographic strategy of mergers and acquisitions by financial institutions on their short‐run and long‐run stock price performance, risk, and operating performance. The geographic strategies include ‘in‐market,’ ‘partial‐overlapping,’ and ‘market‐expanding’ acquisitions. While the market initially reacts more favourably towards ‘market‐expanding’ acquisitions, acquirers in these acquisitions experience the lowest long‐run stock price performance and largest increase in total return volatility and idiosyncratic risk. Acquirers in partial‐overlapping acquisitions experience the most deterioration in operating performance. Our results are robust to different measures of geographic expansion and subsample analysis. These findings have geographic implications for the banking industry regarding expansion through acquisition.

Suggested Citation

  • Jennifer Brodmann & Charles Armah Danso & Thanh Ngo, 2022. "Geographic strategies in mergers and acquisitions by financial institutions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3319-3363, September.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:3:p:3319-3363
    DOI: 10.1111/acfi.12888
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