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

Panagiota Papadimitri, Panagiotis Staikouras, Nickolaos G. Travlos, Chris Tsoumas

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    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.
    Original languageEnglish
    Pages (from-to)744-764
    JournalJournal of Corporate Finance
    Volume58
    Early online date29 Jul 2019
    DOIs
    Publication statusPublished - Oct 2019

    Keywords

    • Bank mergers and acquisitions
    • Enforcement actions
    • Inefficient management

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