The Acquisition of Failing Thrifts: Returns to Acquirers

Thomas E Gosnell, Sylvia C. Hudgins and John A. MacDonald

Financial Management, 1993, vol. 22, issue 4

Abstract: The federal government's resolution of the thrift crisis under the Federal Savings and Loan Insurance Corporation (FSLIC) and the Resolution Trust Corporation (RTC) has been criticized for "giving away" the assets of failed thrifts. One indicator of the regulators' effectiveness and efficiency in disposing of a failed thrift's assets is the equity market's reaction to the announcement that a particular acquirer has been awarded the right to purchase those assets. A few studies have examined this issue with mixed results. In one study, it was found that the acquirers paid less than market value under FSLIC resolutions, and so their shareholders appeared to realize abnormal returns. In another study, benefits were found only for resolutions that took place in December 1988, when several resolutions were concluded quickly prior to a significant change in the tax law.

Date: 1993
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