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Corporate governance of bank mergers

Author

Listed:
  • David A. Becher
  • Terry L. Campbell

Abstract

By investigating the extent to which target directors bargain in their own interests during negotiations between merging banks, we document a strong inverse relation between merger premium and target director retention. This relation holds for both executive (inside) directors and independent outside directors, and other governance mechanisms of targets and bidders fail to diminish this finding. Moreover, individual target director retention is conditioned by the relative size but not by prior target performance. Overall, our results suggest some target directors exercise their bargaining power with the acquirer in a manner counter to the interests of their shareholders during merger negotiations.

Suggested Citation

  • David A. Becher & Terry L. Campbell, 2004. "Corporate governance of bank mergers," Proceedings 918, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhpr:918
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    Cited by:

    1. Alessio De Vincenzo & Claudio Doria & Carmelo Salleo, 2005. "The Motivations for Bank Takeovers: Some Empirical Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 327-358, December.
    2. Alessio De Vincenzo & Claudio Doria & Carmelo Salleo, 2006. "Efficiency vs. agency motivations for bank takeovers: some empirical evidence," Temi di discussione (Economic working papers) 587, Bank of Italy, Economic Research and International Relations Area.
    3. Wang, Hongxia & Sakr, Sameh & Ning, Yixi & Davidson III, Wallace N., 2010. "Board composition after mergers, does it matter to target shareholders?," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 837-851, December.

    More about this item

    Keywords

    Bank mergers; Corporate governance;

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