Punished Banks’ Acquisitions: Evidence from the U.S. Banking Industry

62 Pages Posted: 15 Feb 2018 Last revised: 18 Apr 2019

See all articles by Panagiota Papadimitri

Panagiota Papadimitri

Portsmouth Business School

Panagiotis Staikouras

University of Piraeus

Nickolaos G. Travlos

ALBA Graduate Business School; University of Surrey

Chris Tsoumas

Hellenic Open University (deceased)

Date Written: March 5, 2019

Abstract

We study whether formal enforcement actions, imposed on U.S. banks during 2000-2014 for serious financial safety and internal control problems, affect the probability that punished banks become targets of mergers and acquisitions (M&As). We find an increase in the probability of punished banks’ acquisitions of at least 0.7%. A similar pattern is identified during both the financial crisis period of 2008-2009 and beyond the 2008-2009 period. Furthermore, these acquisitions improve the operating performance of post-acquisition combined entity, lending support to the hypothesis that punished banks’ M&As serve as a means to replace inefficient management and restore the target banks’ performance.

Keywords: bank mergers & acquisitions, enforcement actions, inefficient management

JEL Classification: G21, G28, G34

Suggested Citation

Papadimitri, Panagiota and Staikouras, Panagiotis and Travlos, Nickolaos G. and Travlos, Nickolaos G. and Tsoumas, Chris, Punished Banks’ Acquisitions: Evidence from the U.S. Banking Industry (March 5, 2019). Available at SSRN: https://ssrn.com/abstract=3117786 or http://dx.doi.org/10.2139/ssrn.3117786

Panagiota Papadimitri

Portsmouth Business School ( email )

Portsmouth, PO1 3DE
United Kingdom

Panagiotis Staikouras (Contact Author)

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
Piraeus, Attika 18534
Greece

Nickolaos G. Travlos

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Chris Tsoumas

Hellenic Open University (deceased)

Greece

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