Monday, December 30, 2019

The Impact of Merger Legislation on Bank Mergers

By: Carletti, Elena (Bocconi University, IGIER, and CEPR); Ongena, Steven (University of Zurich, the Swiss Finance Institute, KU Leuven, and CEPR); Siedlarek, Jan-Peter (Federal Reserve Bank of Cleveland); Spagnolo, Giancarlo (SITEStockholm School of Economics, the University of Rome Tor Vergata, EIEF, and CEPR)
Abstract: We fi nd that the introduction of stricter merger control legislation in the European Union in the period 1986–2007 increases the abnormal announcement returns of targets in bank mergers by 7 percentage points. In searching for potential explanations, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.
Keywords: banks; mergers and acquisitions; merger control; antitrust;

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