Interstate Bank Mergers and Their Impact on Shareholder Returns: Evidence From the 1990s

During the 1990s merger activity in the commercial banking industry has expanded at a rapid pace primarily due to the loosening of interstate restrictions and the much-improved health of the banking industry. Our study examines interstate merger activity in the banking industry during the 19911995 time period, measures its impact on stockholder returns, and compares these results to a similar study that uses data from the 1980s. Our findings indicate that during the 1990s returns to targets have been significantly positive while returns to bidders have been significantly negative. These findings differ from the findings of Cometi and De (1991) who report significant positive returns to bidders and targets in interstate mergers during the time period 1982-1986. In addition, our study finds evidence that indicates that there is a significantly negative revaluation of the combined bidder and target values at the merger announcement.

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