Post-Merger Performance of Bank Holding Companies, 1987-1998
Posted: 16 Aug 2005
Abstract
This paper examines the results of material mergers between bank holding companies. Merged bank holding companies experience post-merger profitability below the industry average. The market reaction to the merger announcements is significantly negative. The most important causes of the poor post-merger performance are credit quality and the inadequate generation of fee income. Asset mix and capitalization also play a major part. The controllability of these items demonstrates the management challenge associated with a material merger.
Keywords: bank mergers, mergers and acquisitions, credit quality, cost controls, asset mix
JEL Classification: G21, G34
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