Do regulatory bank mergers improve operating performance?

Abstract

Abstract We analyze the post-merger operating performance of FDIC-assisted bank mergers (regulatory mergers) during and after the 2008–09 financial crisis. Regulatory mergers experience significant improvements in profitability and cost efficiency up to two years following the transaction. These improvements are significantly higher than those experienced by non-merger peers. In contrast, the post-merger operating performance of nonregulatory mergers is not significantly different from the performance of their non-merger peers. For regulatory mergers, the wealth that may have been transferred from the FDIC to the acquirers as incentives for the mergers is not a significant factor in determining the operating performance improvements.