Are Bank Mergers Good News for Shareholders? The Effect of Bank Mergers on Shareholder Value in Japan

This study investigates the effects of bank mergers on the welfare of affiliated client firms. The findings demonstrate that, in general, bank mergers increase the welfare of client firms. However, there are significant differences in the impact of a bank merger on client firms across different merger, bank, and firm characteristics. Client firms of banks involved in mega-mergers do not enjoy an increase in welfare. Client firms of undercapitalized banks in fact suffer significant welfare losses. In the long-run, weak "zombie" firms also in many cases experience welfare losses following the announcement of a merger by their main bank.