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Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As




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    • Delong is from the Zicklin School of Business at Baruch College/CUNY. DeYoung is from the Federal Deposit Insurance Corporation. A substantial portion of this research was performed when DeYoung was at the Federal Reserve Bank of Chicago. The views expressed in this paper are those of the authors and do not necessarily reflect the views of either the Federal Deposit Insurance Corporation or the Federal Reserve Bank of Chicago. The authors thank Yakov Amihud, Allen Berger, Rob Bliss, Eli Brewer, Kenneth Daniels, Paul Halpern, Beverly Hirtle, Wenying Jiangli, Morris Knapp, David Marshall, Hamid Mehran, Art Murton, Don Morgan, Rich Rosen, Wei-Ling Song, Robert Stambaugh, Kevin Stiroh, Dan Sullivan, Greg Udell, and Haluk Unal and two anonymous reviewers for their helpful comments, and Susan Yuska for her assistance with the data.


We offer a new explanation for why academic studies typically fail to find value creation in bank mergers. Our conjectures are predicated on the idea that, until recently, large bank acquisitions were a new phenomenon, with no best practices history to inform bank managers or market investors. We hypothesize that merging banks, and investors pricing bank mergers, learn by observing information that spills over from previous bank mergers. We find evidence consistent with these conjectures for 216 M&As of large, publicly traded U.S. commercial banks between 1987 and 1999. Our findings are consistent with semistrong stock market efficiency.