Despite operating under substantial regulatory constraints, we find that commercial banks manage their investments largely consistent with the predictions of portfolio choice models with capital market imperfections. Based on 1990-2002 data for small (assets less than $1 billion) U.S. commercial...

We propose a theory of mergers that combines managerial merger motives and a regime shift that may lead to some value- increasing merger opportunities. Anticipation of the regime shift can lead to mergers, either for defensive or positioning reasons. Defensive mergers occur when managers acquire...