The cost of using bank mergers as defensive mechanisms against takeover threats

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13 Scopus citations

Abstract

This study shows that targeted banks that become acquirers generally overpay. The evidence suggests that bank mergers are effective devices against takeovers. Targeted banks that engage in acquisitions are less likely to be taken over than are targeted banks that do not engage in acquisitions. However, such a strategy is costly. I find that market reactions to bank mergers involving recently targeted acquirers are significantly more negative than market reactions to mergers involving nontargeted acquirers. This is consistent with the market perceiving acquisitions by targeted banks as being generally defensive in nature.

Original languageEnglish (US)
Pages (from-to)295-310
Number of pages16
JournalJournal of Business
Volume77
Issue number2
DOIs
StatePublished - Apr 1 2004

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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