Post-merger strategy and performance: evidence from the US and European banking industries

Authors


  • We would like to thank Robert Faff (the editor), Michael Collins, Chris Mallin and Phil Molyneux, as well as an anonymous referee for very helpful comments. The usual disclaimer applies.

Abstract

The banking industry has one of the most active markets for mergers and acquisitions. However, little is known about the type of operational strategies adopted by banking firms in the years following a deal. For a sample of bidding banks in the USA and Europe, this study compares the design and performance implications of different post-merger strategies in both geographical regions. Using accounting data, we show that European banks pursue a cost-cutting strategy by increasing efficiency levels vis-à-vis non-merging banks and by cutting back on both labour costs and lending activities. US banks, on the other hand, raise both interest and non-interest income in the post-merger period.

Ancillary