Do CRA-Related Events Affect Shareholder Wealth? The Case of Bank Mergers

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. Copyright 2005 by the Eastern Finance Association.

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“…However,Black et al (2005) report that bank shareholders experience no significant change in wealth around a CRA protest filing.…”

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confidence: 94%

“…A continuing regulatory issue in bank mergers is the Community Reinvestment Act. However,Black et al (2005) report that bank shareholders experience no significant change in wealth around a CRA protest filing.…”

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confidence: 99%

Post-Merger Performance of Bank Holding Companies, 1987-1998

2005

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“…The null hypothesis for the generalized sign test is that the percentage of positive returns is the same in the event window as the estimation period(Cowan, 1992) Black et al (2005). discuss the importance of avoiding contaminated estimation periods in event studies.…”

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confidence: 99%

Information Content of Business Methods Patents

Boscaljon

Filbeck

Smaby

2006

The Financial Review

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We examine the market reaction to business method patents granted to publicly traded firms. Our findings suggest that the "State Street" decision represents a turning point not only for the growth in the number of business method patent filings, but also in the market's awareness and perception of value creation for the filing firms. The granting of a business method patent evokes a positive average stock price reaction, especially in the post-"State Street" period. Cross-sectional differences in abnormal returns depend on the type of patent granted. The market reaction also differs based on industry classification. Copyright 2006, The Eastern Finance Association.

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“…The authors noted that this suggests a decrease in shareholders' wealth resulting from costly delays, legal fees, lost market share, public relations cost, and costly lending commitments. Other negative effects include costs associated with responses that banks have to undertake to improve their CRA records and performance ratings, not to mention strategic costespecially for acquisition-oriented banks-associated with delay or denial of their merger applications (Black, Bostic, Robinson, & Schweitzer, 2005).…”

Section: Banks' Responsiveness To Community Stakeholdersmentioning

confidence: 99%

Corporate Responsiveness to Community Stakeholders

Kobeissi

Damanpour

2007

Business & Society

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Corporate community responsiveness relates to business activities that are integral parts of a firm’s operations and are designed to benefit the firm through benefiting the local communities. Using data from commercial banks in the United States between 1997 and 2000, the authors measured banks’ corporate community responsiveness by their Community Reinvestment Act (CRA) lending activities and their performance ratings by CRA examiners. The authors developed and tested eight hypotheses on the influence of contextual (community income, minority population, and competition) and organizational (age, profitability, risk, institutional ownership, and mergers and acquisitions) factors on the two measures of corporate community responsiveness. The authors found a negative effect for minority population; a positive effect for banks’ profitability; and partial support for community income, competition, and risk factors. The results show no effects for institutional ownership or mergers and acquisitions. The implications of these results for the instrumental aspect of stakeholder theory are discussed.

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Do CRA-Related Events Affect Shareholder Wealth? The Case of Bank Mergers

Cited by 5 publications

References 14 publications

Post-Merger Performance of Bank Holding Companies, 1987-1998

Post-Merger Performance of Bank Holding Companies, 1987-1998

Information Content of Business Methods Patents

Corporate Responsiveness to Community Stakeholders

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