Technical Efficiency and Stock Market Reaction to Horizontal Mergers

This study examines the relationship between stock market reaction to horizontal merger announcements and technical efficiency levels of the participating firms. The analysis is based on data pertaining to eighty mergers between firms in the U.S. manufacturing industry during the 1990s. We employ Data Envelopment Analysis (DEA) to measure technical efficiency, which capture the firms. competence to produce the maximum output given certain productive resources. Abnormal returns related to the merger announcements provide the investor.s re-evaluation on the future performance of the participating firms. In order to avoid the problem of nonnormality, heteroskedasticity in the regression analysis, bootstrap method is employed for estimations and inferences. We found that there is a significant relationship between technical efficiency and market response. The market apparently welcomes the merger as an arrangement to improve resource utilizations.

Has Deregulation Affected Births, Deaths, and Marriages in the U.S. Commercial Banking Industry?

Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminating with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Less well documented, but equally important, was the continuing entry of new banks, tempering the decline in the overall number of banking institutions. This paper examines whether deregulation affected bank new-charter (birth), failure (death), and merger (marriage) rates during the 1980s and 1990s after controlling for bank performance and state economic activity. We find evidence that intrastate deregulation stimulated births and marriages, but not deaths. Moreover, we find little evidence that interstate deregulation affected births, deaths, or marriages, except that the marriage rate rose after the implementation of the Interstate Banking and Branching Efficiency Act. Finally, pair-wise temporal causality tests among births, deaths, and marriages show that mergers temporally lead new charters and that failures lead mergers (a demonstration effect).

Has Deregulation Affected Births, Deaths, and Marriages in the U.S. Commercial Banking Industry?

Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminating with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Less well documented, but equally important, was the continuing entry of new banks, tempering the decline in the overall number of banking institutions. This paper examines whether deregulation affected bank new-charter, failure, and merger rates during the 1980s and 1990s after controlling for bank performance and state economic activity. We find evidence that intrastate deregulation stimulated new charters and mergers, but not failures. Moreover, we find little evidence that interstate deregulation affected new charters, failures, or mergers.

Deregulation and Structural Change in the U.S. Commercial Banking Industry

Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminated with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Some expressed concern about the long-term health of the smaller community banks. This paper describes and discusses the actual evolution of the U.S. banking industry over the past two decades, using the 1976 to 1998 Report of Condition and Income (Call Report) and merger data recently posted on the web site of the Federal Reserve Bank of Chicago. Among several results, more permissive interstate banking and branching regulation significantly associates with higher merger rates, with lower net entry rates, and with higher concentration within states. Interestingly, more permissive intrastate banking and branching regulation only associates with higher concentration.