Acquiring Banking Networks
Does the pre-deal geographic overlap of the subsidiaries and branches of two banks affect the probability that they merge and post-merger value creation and synergies? We compile comprehensive information on U.S. bank acquisitions from 1986 through 2014, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater pre-deal network overlap (1) increases the likelihood that two banks merge, (2) boosts the cumulative abnormal returns of the acquirer, target, and combined banks, and (3) is associated with larger labor cost reductions, managerial turnover, loan quality improvements, and revenue enhancements at target banks.
We thank Yoonha Kim, Andrea Prat, Jose Scheinkman, Michael Weisbach, Bohui Zhang, and seminar participants at Australian National University and University of New South Wales for helpful comments. Lin and Wang also acknowledge the financial support from the Center of Financial Innovation and Development at the University of Hong Kong. All errors are ours. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.