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Acquisition Targets and Motives in the Banking Industry

  • TIMOTHY H. HANNAN
  • STEVEN J. PILLOFF

This paper uses a large sample of individual banking organizations, observed from 1996 to 2005, to investigate the characteristics that made them more likely to be acquired. We use a definition of acquisition that we consider preferable to that used in much of the previous literature, and we employ a competing-risk hazard model that reveals important differences that depend on the type of acquirer. Since interstate acquisitions became more numerous during this period, we also investigate differences in the determinants of acquisition between in-state and out-of-state acquirers. We also employ a subsample of publicly traded banking organizations to investigate the role of managerial ownership in explaining the likelihood of acquisition. The hypothesis that acquisitions serve to transfer resources from less efficient to more efficient uses receives substantial support from our results, as do a number of other relevant hypotheses. Copyright (c) 2009 The Ohio State University No claim to original US government works.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2009.00251.x
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 41 (2009)
Issue (Month): 6 (09)
Pages: 1167-1187

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Handle: RePEc:mcb:jmoncb:v:41:y:2009:i:6:p:1167-1187
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  1. David C. Wheelock & Paul W. Wilson, 1995. "Why do banks disappear? The determinants of U.S. bank failures and acquisitions," Working Papers 1995-013, Federal Reserve Bank of St. Louis.
  2. Julio Rotemberg & Garth Saloner, 1986. "The Relative Rigidity of Monopoly Pricing," Working papers 414, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Robert R. Moore, 1997. "Bank acquisition determinants: implications for small business credit," Financial Industry Studies Working Paper 97-2, Federal Reserve Bank of Dallas.
  4. Aigbe Akhigbe & Jeff Madura & Ann Whyte, 2004. "Partial Anticipation and the Gains to Bank Merger Targets," Journal of Financial Services Research, Springer, vol. 26(1), pages 55-71, August.
  5. Kwangwoo Park & George Pennacchi, 2007. "Harming depositors and helping borrowers: the disparate impact of bank consolidation," Working Paper 0704, Federal Reserve Bank of Cleveland.
  6. Richard J. Rosen & Scott B. Smart & Chad J. Zutter, 2005. "Why do firms go public? evidence from the banking industry," Working Paper Series WP-05-17, Federal Reserve Bank of Chicago.
  7. 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.
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