Mega-mergers in the US banking industry

Said Elfakhani, Rita Ghantous and Imad Baalbaki

Applied Financial Economics, 2003, vol. 13, issue 8, 609-622

Abstract: Historically, financial markets have witnessed several consolidation trends. The year 1998, however, surpassed them all in volume and size of individual deals. This paper utilizes the event study approach to analyse the mega-mergers that took place in the banking industry during 1998, namely that of Travelers Group with Citicorp, NationsBank with BankAmerica, and Bank One with First Chicago NBD. A test of daily abnormal returns is conducted to find out the impact of each of the three mergers on shareholders' wealth from both the acquired and acquirer's perspective. The results obtained indicate that the market's reaction was positive during the on-event sub-period (i.e. days 0 and 1) for both the acquired and acquirer in the Travelers-Citicorp merger; only for the acquirer in the NationsBank-BankAmerica deal, and for the acquired firm in the case of Bank One-First Chicago NBD merger.

Date: 2003
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DOI: 10.1080/0960310032000050669

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