Does Corporate Governance Affect Target IPO Bank Returns Surrounding M&A Announcements

What is it about?

This study examines the relationship between corporate governance and cumulative abnormal returns (CARs) associated with target IPO banks surrounding M&A announcements. Several sets of regressions are performed for the investigation. Empirical evidence suggests that a majority of the sample banks benefit from M&A announcements.

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Photo by cmophoto.net on Unsplash

Photo by cmophoto.net on Unsplash

Why is it important?

Evidence further shows that the CARs are significantly, negatively related to board size. Furthermore, the CARs demonstrate persistent, positive connection to D&O insurance coverage, board independence, and D&O ownership. No exception is documented. However, none of the positive relationship is significant at the conventional levels. In contrast, bank size, the control variable, repetitively shows its significant, negative relationship with respect to target bank stock performance around M&A announcements. Thus, target banks with small board and size benefit more from merger and acquisition announcements than their large counterparts.