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The Impact of Merger Legislation on Bank Mergers

Author

Listed:
  • Elena Carletti

    (Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS))

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute)

  • Jan-Peter Siedlarek

    (Federal Reserve Banks - Federal Reserve Bank of Cleveland)

  • Giancarlo Spagnolo

    (Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF)

Abstract

We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.

Suggested Citation

  • Elena Carletti & Steven Ongena & Jan-Peter Siedlarek & Giancarlo Spagnolo, 2016. "The Impact of Merger Legislation on Bank Mergers," Swiss Finance Institute Research Paper Series 16-33, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1633
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    References listed on IDEAS

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    More about this item

    Keywords

    banks; mergers and acquisitions; merger control; antitrust;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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