Punished banks' acquisitions: Evidence from the U.S. banking industry

Giota Papadimitri (), Panagiotis Staikouras, Nickolaos G. Travlos and Chris Tsoumas

Journal of Corporate Finance, 2019, vol. 58, issue C, 744-764

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 and acquisitions; Enforcement actions; Inefficient management (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:744-764

DOI: 10.1016/j.jcorpfin.2019.07.014

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