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The Effects Of Bank Capital Constraints On Post-Acquisition Performance, Chris Brune, Kevin Lee, Scott Miller

Articles

Researchers have shown that capital constrained firms make better acquisition decisions. However, the literature on bank mergers and acquisitions is silent on this issue. We investigate whether banks constrained by capital requirements make better acquisition decisions than non-constrained banks. We also examine the characteristics of acquisitions to identify the determinants of positive post-acquisition performance. While there are few capital constrained banks that make acquisitions, those that do demonstrate better post-acquisition performance than their nonconstrained counterparts. On average, capital constrained banks pay a lower premium for their target and favor cash over equity financing. We also find that capital constrained banks …