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Stock Price Behavior of Acquirers and Targets Due to M&A Announcement in USA Banking

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  • Clay Moffett

    (University of North Carolina Wilmington, USA.)

  • Mohammad Naserbakht

    (University of North Carolina Wilmington, USA.)

Abstract

This paper aims to analyze the financial impacts of Mergers and Acquisitions (M&As) in USA banking industry. According to this approach, this study is concentrated on M&As in banking industry across the USA to investigate the stock price behavior of targets and acquirers based on the M&A announcement over the period 2000-2010 in a sample of 154 deals. This paper has classified the deals in three main categories; target banks versus acquirer banks, means of payment in M& As (all-cash offers versus all cash and stock offers), and domestic versus cross-border M&As. This classification provides a unique opportunity for analyzing the stock price behavior in different situations and scenarios. This research assumes that there are no other special events in the estimation period (-60, +60) and therefore, has focused on the actual return rather than abnormal return. For the future researches, it’s recommended to use the abnormal return instead of the actual return in order to neutralize the movements in prices that result from factors other than the specific announcement under investigation. According to the results generated by this research, M&A announcements generated positive average actual return over (-60, +60) for both target and acquirer banks in all of the scenarios. Average actual return of acquirers’ shareholders in M&A announcements of all-cash offers are higher than for all cash-stock offers, but Average actual return of targets’ shareholders in M&A announcements of all-cash offers are lower than for all cash-stock offers.

Suggested Citation

  • Clay Moffett & Mohammad Naserbakht, 2013. "Stock Price Behavior of Acquirers and Targets Due to M&A Announcement in USA Banking," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 18(1), pages 105-114, winter.
    • Handle: RePEc:eut:journl:v:18:y:2013:i:1:p:105
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    1. Ahmed A.Elhakeem & Khairy Elgiziry, 2016. "The Impact of Acquisitions Deals Announcement According to Financing Decisions on Value of Listed Acquiring Companies at Egyptian Stock Exchange," Accounting and Finance Research, Sciedu Press, vol. 5(4), pages 115-115, November.

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