Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?

From: Journal of Money, Credit & Banking | Date: August 1, 2000| Author: KANE, EDWARD J. | Copyright information

Methodologically, this paper frames the opportunity cost of any merger as the value of the alternative deals it precludes or defers. This challenges the standard event-study hypothesis that stock markets benchmark the value of a merger deal by the profits the partners would have earned in stand-alone activity. Substantively, the paper finds that megamergers in banking show two size-related exceptions to the prototypical result that acquirer stock value tends to be unaffected or to fall when...

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