I analyzed a sample of 228 U.S. bank acquisitions announced from January 1996 to December 2015. This dissertation explores whether acquiring banks pay more for targets with a higher capital ratio using a better measure of goodwill than previous studies. Specifically, this study uses manually collected goodwill to evaluate the value of bank capital, a measure that I argue is superior to those used in prior studies. I collect information about goodwill for 203 merger and acquisition (M&A) deals. I find a positive relation between the target's capital ratio and the goodwill paid for targets, which is consistent with previous cross sectional analysis on the relation between bank equity capital and value. This positive relation exists in the deals with a bank target, but not when the target is a savings institution. Furthermore, I find that the positive association between the target's capital ratio and goodwill paid by the acquirer only exists in the sample of acquisitions of banks announced before the 2007 financial crisis.
This dissertation also evaluates the value of bank capital by analyzing the changes in shareholders' wealth around the announcement of M&As. My empirical analysis shows that banking mergers create value for the shareholder of targets. However, I find a significantly negative association between target's capital ratio and cumulative abnormal return to acquirers in M&As. Furthermore, I also report that this negative association only holds in M&As announced during and after the financial crisis.
This dissertation also investigates the impact of bank capital on the cost of equity, another channel through which capital can influence banks' value. This dissertation tests the potential impact of bank capital on the cost of equity in the context of bank M&As. M&As are a good laboratory to study the relation between bank capital structure and the cost of equity capital because M&A transactions alter capital structure, and thus could change the cost of equity capital of the acquiring bank. My empirical results show a positive association between the target's capital ratio and the change in acquirer's annual cost of equity capital after the completion of the deals.
Additionally, I also analyze a sample of non-US bank M&As and find a negative association between the target's capital ratio and the cumulative abnormal return of banks acquired in M&As.
| Identifer | oai:union.ndltd.org:unt.edu/info:ark/67531/metadc1248476 |
| Date | 08 1900 |
| Creators | Liu, Shiang |
| Contributors | Mantecon, Tomas, Liu, Yi, Feng, Guohua |
| Publisher | University of North Texas |
| Source Sets | University of North Texas |
| Language | English |
| Detected Language | English |
| Type | Thesis or Dissertation |
| Format | ix, 136 pages, Text |
| Rights | Public, Liu, Shiang, Copyright, Copyright is held by the author, unless otherwise noted. All rights Reserved. |
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