Premium
Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As
Author(s) -
DELONG GAYLE,
DEYOUNG ROBERT
Publication year - 2007
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2007.01205.x
Subject(s) - mergers and acquisitions , valuation (finance) , business , stock (firearms) , phenomenon , value (mathematics) , financial economics , monetary economics , stock market , economics , finance , financial system , computer science , mechanical engineering , paleontology , physics , horse , quantum mechanics , machine learning , engineering , biology
We offer a new explanation for why academic studies typically fail to find value creation in bank mergers. Our conjectures are predicated on the idea that, until recently, large bank acquisitions were a new phenomenon, with no best practices history to inform bank managers or market investors. We hypothesize that merging banks, and investors pricing bank mergers, learn by observing information that spills over from previous bank mergers. We find evidence consistent with these conjectures for 216 M&As of large, publicly traded U.S. commercial banks between 1987 and 1999. Our findings are consistent with semistrong stock market efficiency.