Bidder returns and merger anticipation: Evidence from banking deregulation |
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| Authors: | David A Becher |
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| Institution: | 1. Peking University, HSBC Business School, Nanshan District, Shenzen 518055, China;2. University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104, USA;3. Indiana University, 1275 E. 10th Street, Bloomington, IN 47405, USA;1. Vlerick Business School, Reep 1, 9000 Gent, Belgium;2. Ghent University, Department of Accounting and Corporate Finance, Sint-Pietersplein 7, 9000 Gent, Belgium;3. Cass Business School, City, University of London, 106 Bunhill Row, London EC1Y 8TZ, UK;4. Erasmus University Rotterdam, Burgemeester Oudlaan 50, Rotterdam 3062 PA, the Netherlands;5. School of Management, Swansea University, Bay Campus, Fabian Way, Swansea, SA1 8EN, UK;1. Department of Accounting and Finance, School of Business, Athens University of Economics and Business, Greece;2. Department of Informatics, Athens University of Economics and Business, Greece;3. Essex Business School, University of Essex, U.K. |
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| Abstract: | This paper examines the anticipated components of bidder returns by focusing on the banking industry around the passage of interstate deregulation (Riegle Neal Act of 1994). Overall, firms that became bidders after Riegle Neal have large significant positive returns during its passage. Moreover, these positive wealth effects are significantly larger than the effects at the merger announcement. These results suggest that bidder returns are anticipated and focusing only on narrow event windows underestimates gains to bidders. Finally, the positive bidder returns appear to provide evidence against both the entrenchment and hubris hypotheses. Additional tests provide evidence to suggest that mergers are motivated by synergy rather than disciplinary motives. |
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