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Bank M&A: A market power story?

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  • Hankir, Yassin
  • Rauch, Christian
  • Umber, Marc P.

Abstract

This paper analyzes capital market reactions to international bank M&A. We investigate the combined stock return patterns of targets, bidders, and their peers upon takeover announcement, and closing or withdrawal. We distinguish five common M&A hypotheses and relate characteristic and mutually exclusive abnormal stock return patterns to each hypothesis. The findings show that there are more investors who believe in gains through the exploitation of market power by the post-merger entity than investors who believe in any of the other motives tested in the paper. In a multinomial logistic model we show that patterns related to market power significantly concur with large relative target size, intra-industry mergers, and increasing market concentration, suggesting a substantial lessening of competition through M&A.

Suggested Citation

  • Hankir, Yassin & Rauch, Christian & Umber, Marc P., 2011. "Bank M&A: A market power story?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2341-2354, September.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:9:p:2341-2354
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    Cited by:

    1. Hornstein, Abigail S. & Nguyen, Zachary, 2014. "Is more less? Propensity to diversify via M&A and market reactions," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 76-88.
    2. Avdasheva, Svetlana & Tsytsulina, Dina, 2015. "The effects of M&As in highly concentrated domestic vis-à-vis export markets: By the example of Russian metal industries," Research in International Business and Finance, Elsevier, vol. 34(C), pages 368-382.
    3. Bozos, Konstantinos & Koutmos, Dimitrios & Song, Wei, 2013. "Beta risk and price synchronicity of bank acquirers’ common stock following merger announcements," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 47-58.
    4. Beltratti, Andrea & Paladino, Giovanna, 2013. "Is M&A different during a crisis? Evidence from the European banking sector," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5394-5405.

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