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

This dissertation examines effects of bank mergers on commercial and industrial (C&I) borrower firms' stockholders around various merger event dates. In addition, change in bank executive compensation surrounding mergers is analyzed. Chapter one presents evidence that a strong lending relationship exists between borrower firms and their commercial bank lenders that is altered by bank mergers. Negative abnormal stock returns experienced by firms borrowing fi-om banks are investigated to ascertain the explanatory power of the relationship lending hypothesis. Negative returns are found to be attributable to the change in the lending relationship brought about by bank mergers. In addition, we find evidence of a delayed capital-market response by borrower firm stockholders to bank merger events. We conclude that borrower firms incur significant economic costs in response to changes in their banking relationships resulting fi-om bank mergers. Chapter two tests the hypothesis of manage...