Bank Mergers and Acquisitions in the United States 1990 -1997
An Analysis of Shareholders Value Creation and Premium Paid to Integrate with Megabanks
|Advisor(s):||Drs. Brown, Hanzaee, Kuhns|
This study focused on factors that have positively influenced the model of economic success for commercial and thrift megabanks involved in merger and acquisition activities for the period 1990 - 1997, a period characterized by an unprecedented flurry of merger and acquisition activities among megabanks in the United States. This study identified and measured key independent variables for identifiable mergers and acquisitions among megabanks and tested the extent to which, such independent variables influenced abnormal returns for underlying equities traded in capital markets. This study also tested the hypothesis that megabanks are attracting significantly higher acquisition premiums than the relatively smaller banks.
The data collected and the conclusions drawn were based on the logic of a hypothetico-deductive paradigm, which essentially utilized the techniques of the standard event study methodology, and included parameters of the conventional Capital Asset Pricing Model. This study was based on a scientifically determined sample of over 200 banks in the small bank category and between 68 and 86 banks grouped under the megabank category. The findings revealed that megebank acquirers realized negative abnormal returns and that megabank acquirees did not realize economic value significantly greater than acquirers for those banks that integrated on a merger-of-equals basis. The findings also showed that megabanks seemed more willing to pay higher premiums for the right to integrate with other megabanks vis-a-vis the right to integrate with small banks.
Dr. Ashford Maharaj was born in the twin-island republic of Trinidad & Tobago and migrated to the United States in 1990. He is a graduate of Concordia University, Montreal, Canada and the University of the West Indies, St Augustine, Trinidad. His Graduate studies and research work were done at the City University of New York, Baruch College, New York City and Walden University, Minneapolis, Minnesota. Dr. Maharaj holds the degrees of Bachelor of Arts with specialization in Economics; Master of Science in Education Administration; and Doctor of Philosophy, with specialization in Finance. He also holds postgraduate diplomas in banking, finance, and business management. His many previous appointments include, government senator (ag.) in the Parliament of Trinidad & Tobago; directorships with the National Insurance Board of Trinidad & Tobago and Eastern Industrial Credit Union, and lecturer at the University of the West Indies, School of Continuing Studies and the Cipriani College of Labor and Cooperative Studies. Prior his return to academia,Dr. Maharaj's interest in studying mergers and acquisitions among megabanks originated out of his employment experiences in the commercial loan's area of Chase Manhattan Bank (now J.P. Morgan Chase & Co.), and possesses firsthand knowledge on "merger of equals" among megabanks. Dr. Maharaj, is currently Professor of Finance in the Business Administration Department at Berkeley College, White Plains, New York and an adjunct business professor at the City University of New York's LaGuardia Community College in Long Island City, Queens, New York.