The impact of the manager-shareholder conflict on acquiring bank returns

Marcia Millon Cornett, Gayane Hovakimian, Darius Palia, Hassan Tehranian

Research output: Contribution to journalArticlepeer-review

61 Scopus citations

Abstract

This paper examines whether shareholder value-maximizing corporate governance mechanisms assist in reducing the managerial incentive to enter value-destroying bank acquisitions. We find that diversifying bank acquisitions earn significantly negative announcement period abnormal returns (AR) for bidder banks whereas focusing acquisitions earn zero AR. We then find that corporate governance variables (such as CEO share and option ownership and a smaller board size) in the bidding bank are less effective in diversifying acquisitions than in focusing acquisitions. These results are robust to the inclusion of the usual control variables.

Original languageEnglish (US)
Pages (from-to)103-131
Number of pages29
JournalJournal of Banking and Finance
Volume27
Issue number1
DOIs
StatePublished - Jan 1 2003
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Bank acquisitions
  • Banks
  • Corporate governance

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