Financial Determinants of Bank Takeovers: Note

Cheng, David C.; Gup, Benton E.; Wall, Larry D.

doi:10.2307/1992359

Cited by 66 publications

(47 citation statements)

References 6 publications

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“…For 135 U.S. bank takeovers, Cheng, Gup, and Wall (1989) report that profit ratios of target banks are higher than those of acquirer banks, although mean differences are insignificant. Berger and Humphrey (1992) study mega mergers involving banks exceeding $1 billion in assets and find that bidder banks are on average more X-efficient (relative to a translog stochastic frontier) than target banks.…”

mentioning

confidence: 99%

Accounting for distress in bank mergers

Koetter

Bos

Heid

et al. 2007

Journal of Banking & Finance

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The inability of most bank merger studies to control for hidden bailouts may lead to biased results. In this study, we employ a unique data set of approximately 1,000 mergers to analyze the determinants of bank mergers. We use data on the regulatory intervention history to distinguish between distressed and non-distressed mergers. We find that, among merging banks, distressed banks had the worst profiles and acquirers perform somewhat better than targets. However, both distressed and non-distressed mergers have worse CAMEL profiles than our control group. In fact, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention.

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confidence: 99%

Accounting for distress in bank mergers

Koetter

Bos

Heid

et al. 2007

Journal of Banking & Finance

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“…They perform a logit estimation to estimate the relationship between the likelihood of acquisition and the financial characteristics of the target bank. Cheng, Gup and Wall (1989) is one of the few that focus on acquiring bank characteristics when examining the determinants of bank merger pricing.…”

Section: A Methodologymentioning

confidence: 99%

“…Refer to Coelli, Rao and Battese (1998) and Thanassoulis (2001) for a detail description of the theory and application of DEA. Hannan and Rhoades (1987), Rose (1989), Cheng, Gup and Wall (1989), Hawawini and Swary (1990), Benston, Hunter and Wall (1995) and Focarelli and Panetta (2001) employ accounting ratios while others such as Drake and Hall (2003) and Avkiran (1999) employ DEA approach.…”

Section: The Financial Determinants In Guided Bank Mergersmentioning

confidence: 99%

Factors Determining Mergers of Banks in Malaysia’s Banking Sector Reform

Ahmad¹,

Ariff²,

Skully³

2007

MFJ

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What was termed government-guided merger was a unique banking sector reform implemented in 2002 by the central bank of Malaysia guiding a larger number of depository institutions to form 10 large banks. This paper identifies the factors entering this massive merger exercise. Similar to the finding in bank merger literature, we find larger banks became acquirers. Also, low risk banks had higher probability of becoming an acquiring bank while high-risk banks became targets for takeover. Surprisingly managerial performance-financial ratios and changes in productivity reported as significant factors in prior market-based merger studies-was not significant in this study. Banks closely connected to government had greater chance of becoming acquiring banks while the reverse is true of target banks. These findings have not been reported in other studies of mergers, and are likely to be useful to central banks considering similar reforms (JEL: G21, G34).

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“…When determining depository institution pricing, Rhoades (1987) Cheng, Gup, and Wall (1989), Rogowski and Simonson (1989), Frieder and Petty (1991), Rose (1991), Palia (1993), Fraser andKolari (1988), Shawky, Kilb, andStaas (1996), and Brewer, Jackson, Jagtiani, and Nguyen (2000) each use a measure of the firm's market price divided by its book value.…”

Section: B3 Firm Valuementioning

confidence: 99%

“…Consistent with previous research on depository institution pricing, we control for return-on-assets, equity-to-assets, and log of size 13 (Cheng, Gup, and Wall (1989), appraisal equations or the appraisal estimation reported in the proxy statements. Later alternative ratios will be considered.…”

mentioning

confidence: 99%