Do Bank Mergers Create Shareholder Value? An Event Study Analysis

This paper investigates the economic role of bank mergers in creating shareholder value based on the idea that shareholder wealth will increase if the consolidation leads to the aforementioned gains. This paper is divided into seven sections. The second section of my paper provides an academic review of the literature, focusing on econometric theory that tests the gains in shareholder value and corporate synergies after a merger. The third section introduces a conceptual model I have designed using econometric tools to test how bank mergers create shareholder value. The fourth section embarks on a discussion about my ideal data followed by the fifth section about my actual data. The sixth section is an analysis of my actual regression results. It was found that the average bank merger has either no effect/ X effect on total firm value. The reasons for these results are also enumerated and critiqued in this section. The study of bank mergers remains an area of interesting econometric research because of the performance implications of such mergers and thus, the concluding seventh section will suggest possible areas for future research.