Who acquires whom among stand-alone commercial banks and bank holding company affiliates?

This paper presents the difference in the likelihood of being targets or acquirers among stand-alone banks, single-bank holding company (SBHC) affiliates and multi-bank holding company (MBHC) affiliates. Using a sample of U.S. commercial bank data from 1997 to 2012, we find that MBHC affiliates exhibit a greater likelihood of being targets than do stand-alone commercial banks, while stand-alone banks have a greater probability of becoming targets than do SBHC affiliates. Our findings show that MBHC affiliates tend to have a greater likelihood of being acquirers than do SBHC affiliates, which again have a greater probability of being acquirers than do stand-alone banks. Those banks that acquire another bank within the same MBHC structure tend to be smaller and more financially constrained than those banks acquiring outside the same MBHC structure, whereas targets that are acquired by another bank within the same MBHC structure tend to be smaller, higher profitability and capital than targets that are acquired by banks from outside the MBHC structure. Our results suggest that the MBHC parent attempts to discipline distressed, poorly performing and smaller affiliates by involving them in mergers and acquisitions.     

Bank holding company affiliation and market share performance

This study examines the effect of bank holding company affiliation on the market share performance of banks acquired from 1968–1978. The principal focus of the analysis is on banks acquired in markets without other representation by the parent holding company. Among such banks, holding company affiliation appears to have increased the market share of ‘foothold’ banks (i.e., those with relatively small market share) but reduced the market share of large banks. In both cases, however, the quantitative effect of affiliation is estimated to be very small. Thus, bank regulators may not wish to distinguish on the basis of expected market share performance between ‘foothold’ entry and acquisition of a dominant bank when ruling on market-extension acquisition/merger cases.     

BANK HOLDING COMPANY ACQUISITIONS,STOCKHOLDER RETURNS,AND REGULATORY UNCERTAINTY

This paper examines the returns accruing to the bank holding company (BHC) stockholders when an acquisition is initiated by the BHC. There is a significant, positive abnormal return to these shareholders when the acquisition is announced. The magnitude of this return does not depend on the relative size of the acquired firm. Further, the regulatory environment for these BHC acquisitions introduces uncertainty about the eventual outcome of the review process. Upon approval from the Federal Reserve Board (FRB), the BHC stockholders earn an additional, significantly positive abnormal return.     

Intra-industry signals embedded in bank acquisition announcements

Bank acquisitions have increased in recent years, as more banks attempt to exploit potential synergies, economies of scale, and other benefits. Numerous studies have determined that bank acquisitions generate strong positive valuation effects for targets on average, while the evidence of the impact on acquirers is mixed. Our objectives are: (1) determine whether the announcement of a bank acquisition transmits intra-industry signals; (2) explain why the intra-industry effects vary across acquisition announcements; and (3) explain why the valuation effects of individual rival banks vary. We find that bank acquisition announcements generate significant positive intra-industry effects, on average.The intra-industry effects of rival bank portfolios are not uniform across announcements, as they are conditioned by variables that could signal information about the probability that rival banks will become takeover targets. The valuation effects of rival bank portfolios are positively related to the valuation effects of the target banks, and inversely related to the size and prior performance of rival bank portfolios. Furthermore, the valuation effects are more favorable for individual rival banks that are ultimately acquired. To the extent that these variables reflect the probability of being acquired in the future, the intra-industry effects appear to be more favorable for acquisitions in which there is a higher probability that the corresponding rivals will become targets. Overall, investors discriminate based on event-specific and rival bank-specific characteristics when interpreting the signal transmitted as a result of bank acquisitions.     

Geographic diversification in banking,market share changes,and the viability of small independent banks

The prospect of unlimited nationwide banking raises a question about the viability of small independent banks in competition with large, geographically diversified banking organizations. This study addresses the issue of small bank viability by focusing on the relative performance of independent banks and bank holding company subsidiaries in a regime of intrastate banking, where performance is measured by the cumulative change in a bank's local market share over time. Two regression equations of the same general form are estimated using the same sample of independent and affiliated banks, albeit for different time periods to distinguish between the short-term and long-term effects of affiliation. Regression results indicate that affiliation with a geographically diversified bank holding company generally provides no significant long-term competitive advantage (in terms of market share accumulation) for holding company subsidiaries over independent banks. The only exception is a modest benefit afforded to banks with relatively small pre-acquisition market shares that are acquired by larger bank holding companies as initial entry vehicles into new markets.An earlier version of this article was presented at the 1988 meetings of the Southern Economic Association, San Antonio, Texas.     

Are regulatory capital adequacy ratios good indicators of bank failure? Evidence from US banks

Motivated by massive bank failures during the financial crisis, this paper examines whether capital adequacy ratios required by regulators are associated with bank failure. It investigates whether the association is affected by the bank's proximity to the minimum required capital ratios. If results show a significant association between regulatory capital and failure of banks falling below the minimum capital ratios, then the ratios are set at an adequate level. Examining a sample of 560 US bank holding companies for the period 2003–2009, results reveal that the association between the core (Tier 1) capital ratio and bank failure becomes significant only if the bank holding company has a Tier 1 capital ratio of less than 6%. This is the level below which US bank regulators do not regard banks as being well capitalized. During the financial crisis period of 2007–2009, there is a significant association only when the criterion is set at or above 8%. Market-based probability of default is more significantly associated with failure relative to Tier 1 capital ratio. The findings of this paper are relevant to regulatory policy discussions and Basel III deliberations on capital adequacy at times of financial turmoil.     

INTERSTATE BANK MERGERS: THE EARLY EVIDENCE

This study examines the wealth effects of interstate bank mergers to both the acquired and acquiring firms' shareholders. While the overall results are consistent with the findings of research on nonfinancial mergers — that acquired firms' shareholders gain and acquiring firms' shareholders break even — there is evidence that the acquiring banks cannot be considered a homogeneous group. Specifically, banks involved in relatively large acquisitions earn positive and statistically significant abnormal returns and significantly outperform those involved in relatively smaller mergers. The results suggest there are differential opportunities for gain from interstate mergers, dependent upon the relative size of the acquisition and the degree to which it expands the geographic market served by the bank.     

SOME EVIDENCE THAT BANKS USE INTERNAL CAPITAL MARKETS TO LOWER CAPITAL COSTS

To the extent raising external capital is especially costly for banks (as the preceding article suggests), bank managers have incentives to manage their internal cash flow in ways that minimize their need to raise external equity. One way to accomplish this is to establish bank holding companies that set up internal capital markets for the purpose of allocating scarce capital across their various subsidiaries. By “internal capital market” the authors mean a capital budgeting process in which all the lending and investment opportunities of the different subsidiaries are ranked according to their risk-adjusted returns; and all internal capital available for investment is then allocated to the highestranked opportunities until either the capital is exhausted or returns fall below the cost of capital, whichever comes first. As evidence of the operation of internal capital markets in bank holding companies, the authors report the following set of findings from their own recent studies:

• ? For large publicly traded bank holding companies, growth rates in lending are closely tied to the banks' internal cash flow and regulatory capital position.
• ? For the subsidiaries of bank holding companies, what matters most is the capital position and earnings of the holding companies and not of the subsidiaries themselves.
• ? The lending activity of banks affiliated with multiple bank holding companies appears to be less dependent on their own earnings and capital than the lending of unaffiliated banks.

The authors also report that, after being acquired, previously unaffiliated banks increase their lending in local markets. This finding suggests that, contrary to the concerns of critics of bank consolidation, geographic consolidation may make banks more responsive to local lending opportunities.     

Bank mergers: Integration and profitability

The Treasury Department's 1991 recommendations for financial service reform would have allowed interstate branching by banks, eliminating the requirement that banking companies form a separate subsidiary for each state in which they do business. Supporters of the proposal argue that allowing bank holding companies to merge their subsidiary banks would improve performance. We tested this proposition by studying the before- and-after performance of all bank mergers in the New England states between 1982 and 1987. In the aggregate, merging banks did not achieve significant improvements in operating profits relative to other banks during the first two years after a merger. It is important to distinguish, however, between mergers of newly acquired banks and mergers of banks acquired earlier by the holding company. Mergers of previously acquired banks performed significantly better than mergers of newly acquired banks and, measured by operating return on assets, achieved significant performance improvements relative to the industry.This article may not be reproduced in any form without permission of the authors, who hold the copyright.     

Bank Holding Company Acquisition Activity: Evidence From Pre- and Post-Deregulation Periods

Both acquisition activity and deregulation have had an impact upon share price and performance of commercial bank holding companies. The purpose of this study is twofold: First, to discern the effects of acquisition activity from the effects of the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and Garn-St Germain Depository Institutions Act of 1982 (GSG) on balance sheet composition of bank holding companies; and second, to examine the effects of deregulation on returns to shareholders of acquiring bank holding companies. This study finds that commercial bank holding companies involved in acquisitions experience significant changes in their balance sheet composition, not as a result of acquisition activity, but as a result of deregulation. Additionally, bank holding companies that announced acquisitions prior to the effective date of deregulation earned abnormal returns that were significantly negative, whereas holding companies announcing acquisitions after enactment of deregulation earned returns that were not significantly different from zero. Also, the abnormal returns found in previous studies of bank acquisitions may be biased upward because of increases in systematic risk associated with the passage of DIDMCA and GSG.     

The Impact of Capital Requirements and Managerial Compensation on Bank Charter Value

This paper examines the joint impact of capital requirements and managerial incentive compensation on bank charter value and bank risk. Most of the previous literature in the area of banking and agency theory has focused on asymmetric information between either banks and regulators, (and therefore on the role of bank capital), or between bank shareholders and bank managers, (and therefore on the role of managerial ownership). In this paper we unify these issues and present empirical results from the regression of capital requirements jointly with measures of incentive compensation on Tobin's Q, our proxy for bank charter value, and on the standard deviation of total return, our proxy for bank risk. In a sample of 102 bank holding companies we find that capital levels are consistently a significant positive factor in determining bank charter value and a significant negative factor in determining risk. On the other hand, we find our six measures of incentive compensation to be generally insignificant relative to charter value but do provide some evidence consistent with a theory relating types of incentive compensation with risk.     

Evaluating the Nordea experiment: Evidence from market and accounting data

This paper discusses results and difficulties of comparing banks’ performance based on publicly available data for the case of Nordea, a pan-Nordic bank created through mergers of important national banks. The objective is to determine whether Nordea’s unique strategy of functional integration across four countries can be advantageous. For stock-market data, however, Nordea does not have stable betas on risk factors, and thus the comparables method must be used with great care. The Nordea holding company performed about as well as the comparables, both in terms of stock-market and accounting data. Nordea banks in individual countries outperformed comparable holding companies; by arithmetic, Nordea non-bank operations are not as profitable as its bank operations. In event studies, the data lend only the weakest support to the hypothesis that the market viewed Nordea’s acquisitions as adding value.     

The role of managerial incentives in bank acquisitions

This paper examines the effect of variables related to management incentives, corporate governance, and performance on the likelihood a bank is acquired. We find that banks with higher levels of management ownership are less likely to be acquired, particularly in acquisitions where target managers depart from their jobs following the acquisition. We document high rates of management turnover following bank acquisitions. This evidence is consistent with an entrenchment hypothesis, where management teams block attempts to be acquired. We find little evidence that any other incentive, governance, or performance variables are systematically related to the probability a bank is acquired.     

The performance of foreign owned,minority owned,and holding company owned banks in the U.S.

The regulatory and legal environment shaping the constantly evolving U.S. bank structure is pervasive, making it necessary for regulators to simultaneously consider interrelated aspects of that structure. This paper investigates the simultaneous effects of foreign, minority and holding company ownership upon bank performance with both aggregated and disaggregated models. The aggregated results suggest that foreign owned bank performance is similar to non-attribute banks, but that the performance of minority and holding company owned banks provides some cause for concern. The disaggregated results provide additional insights particularly with respect to U.S. banks owned by foreign banks and black owned banks. Policy implications are discussed.     

Are Banks Affiliated with Bank Holding Companies More Efficient Than Independent Banks? The Recent Experience Regarding Japanese Regional BHCs

Few studies have investigated whether Japanese banks affiliated with bank holding companies are more efficient and profitable than independent banks. The present paper tests this hypothesis by using both a stochastic frontier approach and a market valuation approach. First, our results suggest that banks affiliated with bank holding companies are not more cost-efficient than are independent banks. Because of the brief history of Japanese BHCs, it is fair to conclude that the formation of regional bank holding companies has not achieved efficiency gains so far. Second, we find that banks affiliated with bank holding companies are more profit-efficient than are independent banks. This is particularly apparent when the establishment of the bank holding companies increases market power in regional markets. This supports the Financial Services Agency’s policy to increase the profitability of regional banks through bank consolidation. Finally, based on standard event study methodology, we find that the market did not regard news about the establishment of bank holding companies as significant events.JEL Classification: G21     

Affiliated Bank Performance and the Simultaneity of Financial Decision-Making

The remarkable growth of bank holding companies (BHCs) during the last decade has aroused a great deal of interest and controversy among academic economists and bank regulators. One of the important issues discussed has been the impact of holding company affiliation on the operating performance of the acquired banks. Subsequent empirical testing of the question has produced a wide array of results. Nevertheless, a recent survey of the literature by the staff of the Federal Reserve Board [18] concluded that while not entirely unambiguous, the findings are “relatively consistent and conclusive.” Such a sweeping generalization seems premature at best. In a recent issue of this Journal [4], we proposed an empirical model designed to test the interdependency between financial decision-making and bank performance. The purpose of this note is to examine the implications of that investigation for the BHC performance issue. The impact of affiliation on bank performance has been analyzed in several different ways; however, no study has considered the important theoretical and statistical implications of the simultaneity question.     

我国村镇银行控股公司的发展与规制

村镇银行控股公司是以符合条件的金融机构子公司身份设立的银行业金融机构,可由境内金融机构在绝对控股基础上与外资或民资共同发起设立．通过新设、并购、股权转换方式建立或整合其下的村镇银行子公司。村镇银行控股公司将来可以用营业让与方式脱壳设立为纯粹型农村金融控股公司,前者可比照银行业金融机构监管,后者需采用机构与功能监管相结合的类伞形牵头监管模式,并应从市场准入、运营监管、市场退出等多方面完善法制建设。     

The role of governance on bank liquidity creation

This paper examines the impact of internal bank governance on bank liquidity creation in the U.S. before, during and after the 2007–2009 financial crisis. Using bank holding company level data, we analyze whether better-governed banks create higher levels of liquidity. We find that this effect is positive and significant but only for large bank holding companies. Further analysis reveals that specific internal governance categories: CEO education, compensation structure, progressive practices, and ownership have a significant effect on bank liquidity. However, this positive effect occurs mostly during the crisis period, and for large banks that are also high liquidity creators. Finally, we find that the effect of governance on liquidity creation increases during the crisis period. These findings are robust even while controlling for liquidity measures, bank size, and endogeneity problems between governance and liquidity creation.     

Are Bank Holding Companies a Source of Strength to Their Banking Subsidiaries?

I document evidence that a bank affiliated with a multi-bank holding company (MBHC) is significantly safer than either a stand-alone bank or a bank affiliated with a one-bank holding company. Not only does MBHC affiliation reduce the probability of future financial distress, but distressed affiliated banks are also more likely to receive capital injections, recover more quickly, and are less likely to fail over the next year. Moreover, the measured benefits of affiliation are much larger than those that existed before recent reforms of bank holding company regulation, suggesting that much of the observed benefit can be attributed to regulation and not the market.     

智力资本对上市商业银行绩效的影响--基于VAIC测算方法的实证研究

本文使用VAIC测算方法测算2013-2017年31家上市商业银行智力资本,使用静态面板模型和动态面板模型探究智力资本对商业银行绩效的长短期影响。研究发现,智力资本及其组成对商业银行绩效具有显著促进作用,其中结构资本效率的作用大于人力资本效率;智力资本对商业银行绩效的作用受银行的所有制结构影响;智力资本对商业银行绩效的作用具有持续性。结果带来的启示在于,商业银行应积极响应国家金融供给侧结构性改革政策,充分重视对智力资本资源的利用,不同所有制结构的商业银行对组织结构变革要有针对地实施不同措施。