Bank Mergers,REIT Loan Pricing and Takeover Likelihood |
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Authors: | III" target="_blank">William G HardinIII Zhonghua Wu |
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Institution: | (1) Department of Finance and Real Estate, Florida International University, RB 208b, 11200 SW 8th Street, Miami, FL 33199, USA |
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Abstract: | The impact of bank mergers on Real Estate Investment Trust (REIT) loan pricing and takeover likelihood is assessed. REITs
that lose their primary banking relationship due to bank mergers pay higher interest rates on future borrowings. Bank consolidation
reduces bank competition for REIT loans which affects loan pricing. Moreover, based on randomly matched samples of REITs,
the results imply that firms losing their agent banks due to bank mergers and those with limited access to bank debt are more
likely to be acquired while REITs associated with acquiring banks are more likely to acquire other firms. Additional analysis
of the 92 merged REITs reveals that 33% of the target REITs’ banks are merged with their REIT acquirers’ banks prior to the
REIT mergers while 67% of the target REITs share at least one major bank with their acquirer. |
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