Who acquires whom among stand-alone commercial banks and bank holding company affiliates?

Cuong Ly, Kim; Liu, Hong; Opong, Kwaku

Abstract

This paper presents the difference in the likelihood of being targets or acquirers among stand-alone banks, single-bank holding company (SBHC) affiliates and multi-bank holding company (MBHC) affiliates. Using a sample of U.S. commercial bank data from 1997 to 2012, we find that MBHC affiliates exhibit a greater likelihood of being targets than do stand-alone commercial banks, while stand-alone banks have a greater probability of becoming targets than do SBHC affiliates. On the other hand, our findings show that MBHC affiliates tend to have a greater likelihood of being acquirers than do SBHC affiliates, which again have a greater probability of being acquirers than do stand-alone banks. Those banks that acquire another bank within the same MBHC structure tend to be smaller and more financially constrained than those banks acquiring outside the same MBHC structure, whereas targets that are acquired by another bank within the same MBHC structure tend to be smaller, higher profitability and capital than targets that are acquired by banks from outside the MBHC structure. Our results suggest that the MBHC parent attempts to discipline distressed, poorly performing and smaller affiliates by involving them in mergers and acquisitions.

Citation

Cuong Ly, K., Liu, H., & Opong, K. (2017). Who acquires whom among stand-alone commercial banks and bank holding company affiliates?. International Review of Financial Analysis, 54, 144-157. https://doi.org/10.1016/j.irfa.2016.11.003

• Journal Article Type: Article
• Acceptance Date: Nov 14, 2016
• Online Publication Date: Nov 15, 2016
• Publication Date: 2017-11
• Deposit Date: Nov 11, 2019
• Publicly Available Date: Jan 20, 2020
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 54
• Pages: 144-157
• DOI: https://doi.org/10.1016/j.irfa.2016.11.003
• Keywords: merger; acquisition; bank holding company affiliates; stand-alone commercial banks JEL Classification: G200, G210, G340
• Public URL: https://nottingham-repository.worktribe.com/output/3196244
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1057521916301673