Essays on the effects of bank mergers (original) (raw)

Changes in corporate performance associated with bank acquisitions

Journal of Financial Economics, 1992

This paper examines the post-acquisition performance of large bank mergers between 1982 and 1987. On the whole, the merged banks outperform the banking industry. Their better performance appears to result from improvements in the ability to attract loans and deposits, in employee productivity, and in profitable asset growth. Further, we find a significant correlation between announcement-period abnormal stock returns and t!:e various performance measures, showing that market participants are able to identity in advance the improved performance associated with bank acquisitions.

The Impact of Bank Consolidation on Commercial Borrower Welfare

SSRN Electronic Journal, 2000

We estimate the impact of bank merger announcements on borrowers' stock prices for publiclytraded Norwegian firms. In addition, we analyze how bank mergers influence borrower relationship termination behavior and relate the propensity to terminate to borrower abnormal returns. We obtain four main results. First, on average borrowers lose about one percent in equity value when their bank is announced as a merger target. Small borrowers of target banks are especially hurt in mergers between two large banks, where they lose an average of about three percent. Small target borrowers are not harmed, and appear to even gain, from mergers between small banks. Second, bank mergers lead to higher relationship exit rates for three years after a bank merger, and small bank mergers lead to larger increases in exit rates than large mergers. Third, target borrower abnormal returns are positively related to pre-merger exit rates, indicating that firms that find it easier to switch banks are less harmed when their bank merges. Fourth, we find weak evidence that target borrowers with large merger-induced increases in exit rates are more negatively affected by bank merger announcements, suggesting that target borrowers can be forced out of relationships and suffer welfare losses as a result of bank mergers.

The effects of bank mergers on credit availability: evidence from corporate data

2003

A large literature on the effects of bank consolidation focuses on direct efficiency gains for participating banks and market power effects. The special nature of credit markets suggests that indirect informational effects for borrowers may be generated by bank consolidation. In particular, borrowers that depend on relationship-based lending may face a reduction in credit availability because soft information gets lost

An Examination of Non-Government-Assisted US Commercial Bank Mergers During the Financial Crisis

SSRN Electronic Journal, 2013

In this study, we examine non-government-assisted US commercial bank merger activity prior to and during the recent financial crisis. Mergers that occur throughout the crisis appear to be more significant events for both targets and acquirers. Acquirers seek out relatively larger targets during the crisis and offer premiums are higher than pre-crisis values. Valuation discrepancies between targets and acquirers are also greater for crisis period mergers, suggesting that merger gains outweigh presumably high capital reallocation costs. Acquirers have lower capital ratios than their peers during the crisis, indicating that they may use mergers defensively as recapitalization events. However, crisis period mergers do not appear to be motivated by asset-based liquidity concerns for either the target or acquirer. Examining how firm characteristics relate to value creation, we find targets that are undervalued relative to their acquirers see larger offer premiums during the crisis, but not before. Targets with poorer-performing loan portfolios, however, observe lower offer premiums during the crisis. Lastly, we find overall merger announcement value creation during the financial crisis is greater when targets have higher quality assets, are better capitalized, and are less efficient.

The Impact Of Mergers On Company Performances In The Banking Sector

Jurnal Pajak dan Keuangan Negara (PKN)

This study aims to examine the financial performance of PT Bank Oke Indonesia, which carried out the merger in 2017. This study employs financial performance ratios and stock performance as indicators to overview the effect of mergers on company performance. The research data is sourced from quarterly financial reports from the 1st quarter of 2017 to the 4th quarter of 2021 obtained from the company's website. In addition, research data is also sourced from 3-month stock prices within the same period, derived from www.finance.yahoo.com. Financial performance testing employs descriptive statistical analysis with the Wilcoxon test, while stock performance is tested through stock return value analysis. The test results show that the company's financial performance decreased after the merger. Tests on stock performance also suggest an impairment after the merger. It indicates that the short-term merger carried out by PT Bank Oke Indonesia failed to provide a positive value for t...

Winners or Losers? The Effects of Banking Consolidation on Corporate Borrowers

2007

We estimate the impact of bank mergers and acquisitions (M&As) on outstanding credit, credit lines, and the sensitivity of investment to cash f low using a large sample of Italian corporate borrowers. We distinguish between firms that experienced relationship termination as a consequence of bank M&As and those that did not. Our findings are consistent with bank M&As having an adverse effect on credit, particularly when the M&A is followed by relationship termination. The effect persists 3 years and then is absorbed, suggesting that firms are able to compensate for the negative shock.

The Relationship Between Merger & Acquisition and Bank Risks

2021

This study aimed to investigate the relationship between merger & acquisition and bank risks. The sample of the study consisted of 55 commercial banks sector listed on Orbs from (2011-2016). The results of the study showed that there is no relationship between the net benefit and bank`s risk, and also there is no relationship between the capital ratio and bank`s risk, and also there is no relationship between the equity ratio and bank`s risk, that there is a relationship between the capital ratio and bank`s risk. Generally, we note no relationship between the merger & acquisition and banks risk. The recommended of the study recommended that the most important of which are the concentration of banks in general on the level of losses they suffer due to the loans extended to customers and other institutions. JEL: G10; G21; G15 Article visualizations:

THE IMPACTS OF BANK MERGERS AND ACQUISITIONS (M&As) ON BANK BEHAVIOUR

This thesis examines the impact of bank mergers and acquisitions (M&As) on lending behaviour by commercial banks. We use the data set of large European commercial banks from 1997 to 2005. Empirical models are formulated to explain the effects of mergers on bank loan pricing behaviour, interest margin setting, credit availability and lending objectives. The analysis provides evidence that mergers have statistically significant influence on reduced lending rates, interest margins and loan supply. In addition, lending objectives for merged and non-merging banks are different, in that merge-involved banks tend to emphasise maximising their utility, while non-merging banks focus on remaining safe. These results suggest that merged banks can obtain efficiency gains through mergers and can pass these benefits to their customers in the form of lower lending rates and interest margins. In addition, diversification gains could arise from consolidations. This is because merged banks focus more on other business activities than traditional intermediary activities. As non-interest income increases in relation to interest income, banks can diversify their business activities and can reduce their non-interest costs. As a result, they can be exposed to lower risk and therefore be less risk averse than non-merging banks.

A Case Study of the Local Bank Merger: Is the Acquiring Entity Better Off?

Accounting and Finance Research, 2013

The case study involves the merger between CIMB (previously known as Bumiputera Bank Berhad) and Southern Bank Berhad (SBB). CIMB Group and Southern Bank, being the target bank is the nation's second-smallest lender, taken over by CIMB 15 March 2006. The objective of the study is to investigate whether there is any significant difference in the performance of the acquiring company (CIMB) between pre-merger and post-merger periods. This paper uses a sample period of three years crossing-over the announcement date. The performance measure is based on the daily and weekly returns are computed based on the share. Analysis on the daily returns is ranging from 30 days to 360 days, whereas, weekly returns are analyzed using a range of 7 to 78 weeks. A paired sample t-test is adopted. The findings conclude that there are no significant differences between the pre-merger and post-merger periods and hence, on average total share holder value is not really affected by the announcement of the M&A. However, the results reveal that acquiring firms are bound to experience positive returns in the long run not in the short run.

Performance Changes Around Bank Mergers: Revenue Enhancements versus Cost Reductions

Journal of Money, Credit, and Banking, 2006

This paper examines operating performance around commercial bank mergers. We find that industry adjusted operating performance of merged banks increases significantly after the merger, large bank mergers produce greater performance gains than small bank mergers, activity focusing mergers produce greater performance gains than activity diversifying mergers, geographically focusing mergers produce greater performance gains than geographically diversifying mergers, and performance gains are larger after the implementation of nationwide banking in 1997. Further, we find improved performance is the result of both revenue enhancements and cost reduction activities. However, revenue enhancements are most significant in those mergers that also experience reduced costs.