Market perception of efficiency in bank holding company mergers: the roles of the DEA and SFA models in capturing merger potential |
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| Authors: | Theodor Kohers Ming‐hsiang Huang Ninon Kohers |
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| Institution: | 1. Department of Business Management, Faculty of Commerce, Fukuoka University, 8-19-1 Nanakuma, Jonan-ku, Fukuoka 8140180, Japan;2. Department of Accountancy, Finance and Economics, Huddersfield Business School, University of Huddersfield, Huddersfield HD1 3DH, UK;1. La Trobe Business School, La Trobe University, Bundoora,VIC 3086, Australia;2. Newcastle Business School, The University of Newcastle, Newcastle, NSW 2300, Australia |
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| Abstract: | Using the Stochastic Frontier Approach (SFA) and Data Envelope Analysis (DEA), this study examines the influence of bank efficiencies on the market assessment of bank holding company (BHC) mergers. The following two questions are addressed: (1) Is the target BHC's frontier efficiency reflected in the bidder BHC's abnormal returns? and (2) Does the difference in frontier efficiency between the bidder and/or target banks relative to their peer institutions influence the acquirer's abnormal returns? In support of the Inefficient Management Hypothesis, the findings indicate that bidder wealth effects do incorporate the target's X-efficiency as well as the difference in bidder/target efficiencies relative to their peer institutions. |
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| Keywords: | Bank efficiency Bank holding company merger DEA SFA G21 G34 G14 |
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