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Empirical Evidence on the Motives for Bank Mergers


  • Dean F. Amel

    (Federal Reserve Board)

  • Stephen A. Rhoades

    (Federal Reserve Board)


Determinants of bank mergers are analyzed to get an indication of the motives for mergers. The analysis is based on 1,724 bank mergers and acquisitions from 1978 to 1983 using multinomial logit analysis for testing purposes. Market share of the target and per capita income stand out as attractive to acquiring firms, but growth and profits do not. Overall, the findings in this study do not point to any single motive for bank acquisitions. This is consistent with findings for the industrial sector and most other findings for banking.

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  • Dean F. Amel & Stephen A. Rhoades, 1989. "Empirical Evidence on the Motives for Bank Mergers," Eastern Economic Journal, Eastern Economic Association, vol. 15(1), pages 17-27, Jan-Mar.
  • Handle: RePEc:eej:eeconj:v:15:y:1989:i:1:p:17-27

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    References listed on IDEAS

    1. Utton, M A, 1972. "Mergers and the Growth of Large Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 34(2), pages 189-197, May.
    2. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    3. Samuel H. Talley, 1974. "The impact of holding company acquisitions on aggregate concentration in banking," Staff Studies 80, Board of Governors of the Federal Reserve System (U.S.).
    4. Hannan, Timothy H & Rhoades, Stephen A, 1987. "Acquisition Targets and Motives: The Case of the Banking Industry," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 67-74, February.
    5. Jesse W. Markham, 1955. "Survey of the Evidence and Findings on Mergers," NBER Chapters,in: Business Concentration and Price Policy, pages 141-212 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ely, David P. & Song, Moon H., 2000. "Acquisition activity of large depository institutions in the 1990s:: An empirical analysis of motives," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(4), pages 467-484.
    2. Andrés Garcia & José Gomez, 2009. "Determinantes de las fusiones y adquisiciones en el sistema financiero colombiano. 1990-2007," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, May.
    3. Went, Peter, 2003. "A quantitative analysis of qualitative arguments in a bank merger," International Review of Financial Analysis, Elsevier, vol. 12(4), pages 379-403.
    4. Hernando, Ignacio & Nieto, Mara J. & Wall, Larry D., 2009. "Determinants of domestic and cross-border bank acquisitions in the European Union," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1022-1032, June.
    5. 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.
    6. José Eduardo Gómez-González, 2012. "Failing and Merging as Competing Alternatives during Times of Financial Distress: Evidence from the Colombian Financial Crisis," International Economic Journal, Taylor & Francis Journals, vol. 26(4), pages 655-671, October.
    7. Timothy H. Hannan & Steven J. Pilloff, 2004. "Will the proposed application of Basel II in the United States encourage increased bank merger activity? evidence from past merger activity," Finance and Economics Discussion Series 2004-13, Board of Governors of the Federal Reserve System (U.S.).
    8. Timothy H. Hannan & Steven J. Pilloff, 2009. "Acquisition Targets and Motives in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1167-1187, September.
    9. García-Suaza, Andrés Felipe & Gómez-González, José E., 2010. "The competing risks of acquiring and being acquired: Evidence from Colombia's financial sector," Economic Systems, Elsevier, vol. 34(4), pages 437-449, December.
    10. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
    11. Harold A. Black & Raphael W. Bostic & Breck L. Robinson & Robert L. Schweitzer, 2005. "Do CRA-Related Events Affect Shareholder Wealth? The Case of Bank Mergers," The Financial Review, Eastern Finance Association, vol. 40(4), pages 575-586, November.
    12. John Goddard & Donal McKillop & John Wilson, 2009. "Which Credit Unions are Acquired?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 231-252, December.
    13. Anthony M. Santomero & David L. Eckles, 2000. "The determinants of success in the new financial services environment: now that firms can do everything, what should they do and why should regulators care?," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 11-23.
    14. Carow, Kenneth A. & Lee, Winson B., 1997. "State passage of interstate banking legislation: An analysis of firm, legislative, and economic characteristics," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 1017-1043, July.
    15. Ghosh, Chinmoy & Harding, John & Phani, B.V., 2008. "Does liberalization reduce agency costs? Evidence from the Indian banking sector," Journal of Banking & Finance, Elsevier, vol. 32(3), pages 405-419, March.
    16. Carow, Kenneth A. & Heron, Randall A., 1998. "The interstate banking and branching efficiency act of 1994: A wealth event for acquisition targets," Journal of Banking & Finance, Elsevier, vol. 22(2), pages 175-196, February.
    17. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "Effekte von Fusionen in Kontinentaleuropa und Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 204-213.

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