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

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

doi:10.1016/j.jcorpfin.2019.07.014

Journal of Corporate Finance Vol. 58 2019

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

Panagiota Papadimitri¹; Panagiotis Staikouras^2,3; Nickolaos G. Travlos^4,5,6; Chris Tsoumas⁷

¹ University of Portsmouth · ² University of Piraeus · ³ Piraeus Bank · ⁴ Alba Graduate Business School, The American College of Greece · ⁵ The American College of Greece · ⁶ University of Surrey · ⁷ Hellenic Open University

open access

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.

DOI: 10.1016/j.jcorpfin.2019.07.014
Volume: 58
Pages: 744-764
Language: en
Sources: openalex crossref bibtex:phds-export.bib

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

Abstract

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