The Dynamics of Mergers of Equals in the Banking Industry

Merger activity had dramatically increased in the banking industry during the 1990s. In the last few years, many of these mergers have been announced as a "merger of equals." However, many studies have suggested that mergers of equals are different from acquisitions (Houston and Ryngaert 1994, 2000). This finding could suggest that there are fundamental differences between the returns for mergers of equals and acquisitions of banking firms. To test if mergers of equals in fact differ from acquisitions, I examine bidder and target returns, number of days to complete the transaction, and returns based on headquarter location. Overall, I find that there are statistically significant differences in the returns to bidders and targets in mergers of equals versus acquisitions. These results suggest that future studies that examine wealth effects from bank mergers need to control for mergers of equals.B.S. (Bachelor of Science