Market reaction to large bank merger announcements in oligopolies |
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Authors: | Adham Chehab |
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Institution: | (1) School of Business and Global Studies, University of La Verne, 1950 Third St., 91750 La Verne, CA |
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Abstract: | This paper evaluates the individual and rival stock price reactions to large bank merger announcements and subsequent regulatory
rejection in an oligopoly. The results show that the announcements produce significant positive abnormal returns for the merger
candidates. Regulatory obstacles and denial of the proposed mergers produce significant negative returns. Analysis of the
rivals’ reactions doesn’t produce consistent significant results. This suggests that the market reactions for the merging
banks results are driven by expected increases in efficiencies. The rivals’ reaction is explained by the fact that the market
would remain contestable after the mergers since the offered products are homogeneous.(JEL G14, G34) |
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Keywords: | |
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