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The Impact of Merger Legislation on Bank Mergers

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  • Elena Carletti
  • Steven Ongena
  • Jan-Peter Siedlarek
  • Giancarlo Spagnolo

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, 2017. "The Impact of Merger Legislation on Bank Mergers," Working Papers 16-14R, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:161401
    DOI: 10.26509/frbc-wp-201614r
    Note: This is the first revision of a paper originally published in June of 2016.
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    More about this item

    Keywords

    mergers and acquisitions; merger control; antitrust; banks;
    All these keywords.

    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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