Target's corporate governance and bank merger payoffs
Commercial bank merger and acquisition (M&A) transactions are especially informative for analyzing the impact of differing corporate governance structures on the balance of corporate control between managers and shareholders. We exploit these special characteristics to investigate the balance of control between top-tier managers and shareholders using data from bank M&A transactions over the period 1990-2004. Unlike research on non-financial firms, the impacts of independent directors, managerial share ownership, and independent blockholders on bank merger purchase premiums in this ...
When target CEOs contract with acquirers: evidence from bank mergers and acquisitions
This paper investigates the impact of the target chief executive officer?s (CEO) postmerger position on the purchase premium and target shareholders? abnormal returns around the announcement of the deal in a sample of bank mergers during the period 1990?2004. We find evidence that the target shareholders? returns are negatively related to the postmerger position of their CEO. However, these lower returns are not matched by higher returns to the acquirer?s shareholders, suggesting little or no wealth transfers. Additionally, our evidence suggests that the target CEO becoming a senior officer ...
Small-firm credit markets, SBA-guaranteed lending, and economic performance in low-income areas
SBA guaranteed-lending programs are one of many government-sponsored market interventions aimed at promoting small business. The rationale for providing SBA loan guarantees is often based on the argument that they reduce credit rationing in low-income markets for small business loans. In this paper we empirically test whether SBA-guaranteed lending has a greater impact on economic performance in low-income markets. Using local labor market employment rates as our measure of economic> performance, we find evidence consistent with this proposition. In particular, we find a positive and ...
SBA guaranteed lending and local economic growth
Increasingly, policymakers look to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration's (SBA) loan-guarantee program. Using a panel data set of SBA guaranteed loans, we assess whether SBA guaranteed lending has an observable impact on local economic performance. We find a positive and significant (although economically small) relationship ...
Insider bank runs: community bank fragility and the financial crisis of 2007
From 2007 to 2010, more than 200 community banks in the United States failed. Many of these failed community banking organizations (CBOs) held less than $1 billion in total assets. As economic conditions worsen, banking organizations are expected to preserve capital to withstand unexpected losses. This study examines CBOs prior to failure or becoming problem institutions to understand if, on average, a run on capital by insiders via dividend payouts led to greater financial fragility at the onset of the crisis. We use a control group of similar-sized banks that did not fail or become problem ...
Impact of independent directors and the regulatory environment on bank merger prices: evidence from takeover activity in the 1990s
This article examines the primary motivation of the bank merger waves in the 1990s. Our investigation of the factors that determine bid premiums paid for target banks focuses on the importance of the financial characteristics of the targets, composition of their boards of directors, and the regulatory environment. ; The value of the target bank to the acquiring bank should reflect its present discounted value of future net cash flows. Thus, at a minimum, the bid price should be a combination of the stand-alone value of the net assets of the target bank and the net cash flows from ...
The value of using interest rate derivatives to manage risk of U.S. banking organizations
This article examines the major differences in the accounting and stock market characteristics of banking organizations that use derivatives relative to those that do not.