Bank Holding Company Acquisition Activity: Evidence From Pre‐ and Post‐Deregulation Periods
Document Type
Article
Publication Date
1-1-1994
Description
Both acquisition activity and deregulation have had an impact upon share price and performance of commercial bank holding companies. The purpose of this study is twofold: First, to discern the effects of acquisition activity from the effects of the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and Garn‐St Germain Depository Institutions Act of 1982 (GSG) on balance sheet composition of bank holding companies; and second, to examine the effects of deregulation on returns to shareholders of acquiring bank holding companies. This study finds that commercial bank holding companies involved in acquisitions experience significant changes in their balance sheet composition, not as a result of acquisition activity, but as a result of deregulation. Additionally, bank holding companies that announced acquisitions prior to the effective date of deregulation earned abnormal returns that were significantly negative, whereas holding companies announcing acquisitions after enactment of deregulation earned returns that were not significantly different from zero. Also, the abnormal returns found in previous studies of bank acquisitions may be biased upward because of increases in systematic risk associated with the passage of DIDMCA and GSG.
Citation Information
Holdren, Don P.; Bowers, Helen M.; and Mason, W. Joe. 1994. Bank Holding Company Acquisition Activity: Evidence From Pre‐ and Post‐Deregulation Periods. Financial Review. Vol.29(2). 275-292. https://doi.org/10.1111/j.1540-6288.1994.tb00821.x ISSN: 0732-8516