Premium
Post‐Merger Performance of Bank Holding Companies, 1987–1998
Author(s) -
Knapp Morris,
Gart Alan,
Becher David
Publication year - 2005
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2005.00124.x
Subject(s) - profitability index , business , capitalization , asset (computer security) , restructuring , asset quality , quality (philosophy) , mergers and acquisitions , financial system , market capitalization , finance , monetary economics , economics , profit (economics) , stock market , capital adequacy ratio , paleontology , linguistics , philosophy , computer security , epistemology , horse , computer science , biology , microeconomics
This paper examines the results of material mergers between bank holding companies (BHCs). Merged BHCs experience post‐merger profitability below the industry average. The market reaction to the merger announcements is significantly negative. The most important causes of the poor post‐merger performance are credit quality and the inadequate generation of fee income. Asset mix and capitalization also play a major part. The controllability of these items demonstrates the management challenge associated with a material merger.