Returns to Acquirers and Competition in the Acquisition Market: The Case of Banking

Abstract

In this paper the authors examine the effect of competition in the market for bank acquisitions on the acquirers' stock returns. Bank acquisitions are examined because federal and state regulations greatly facilitate the identification of potential bidders and alter native targets in an acquisition. They find that the gain to acquirers is positively related to the number of alternative target firms available and negatively related to the number of other potential bidders. These results provide some insights into the sources of gains from bank acquisitions. Copyright 1987 by University of Chicago Press.