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U.S. bank M&As in the post-Dodd-Frank Act era: Do they create value?

George Leledakis and Emmanouil G. Pyrgiotakis

MPRA Paper from University Library of Munich, Germany

Abstract: The Dodd-Frank Act has produced a new wave of bank M&As. This consolidation trend is mainly driven by mergers of small banks, since small banks feel the need to merge in order to absorb the compliance costs of the new regulation. We document that the $10 billion asset-size threshold has become the ceiling of the optimal scale for bank combinations, given that banks below this $10 billion mark avoid several regulatory hurdles imposed by the Dodd-Frank Act. Results for these “less than $10 billion mergers” suggest significant value creation for both firms’ shareholders: Bidders experience large anticipated wealth gains during the passage of the legislation since the market had ex-ante identified these bids. Consequently, at the deal announcement date, bidders experience insignificant returns, targets experience large abnormal returns and the combined abnormal returns are statistically positive. Finally, bidders experience positive abnormal returns at the deal completion date. On the contrary, results for larger bank mergers indicate a redistribution of wealth from the bidder to the target firm.

Keywords: Dodd-Frank regulation; shareholder wealth; market anticipation; event study (search for similar items in EconPapers)
JEL-codes: G14 G21 G28 G34 (search for similar items in EconPapers)
Date: 2016-08-23
New Economics Papers: this item is included in nep-com and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://mpra.ub.uni-muenchen.de/73290/1/MPRA_paper_73290.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/93207/1/MPRA_paper_93207.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/94519/1/MPRA_paper_94519.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/94513/1/MPRA_paper_94513.pdf revised version (application/pdf)

Related works:
Journal Article: U.S. bank M&As in the post-Dodd–Frank Act era: Do they create value? (2022) Downloads
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