Post-merger performance of bank holding companies, 1987-1998

Abstract

This paper examines the results of material mergers between bank holding companies (BHCs). Merged BHCs experience post-merger profitability below the industry average. The market reaction to the merger announcements is significantly negative. The most important causes of the poor post-merger performance are credit quality and the inadequate generation of fee income. Asset mix and capitalization also play a major part. The controllability of these items demonstrates the management challenge associated with a material merger. © 2005 Blackwell Publishing Ltd.