—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. It
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.
—bank size, corporate governance, M&A
announcements, target IPO bank returns.
Su-Jane Chen is with the Metropolitan State College of Denver, Denver,
CO 80122 USA (corresponding author: 303-556-3006; fax: 303-556-6173;
Juan M. Dempere is with Metropolitan State College of Denver, Denver,
CO 80122 USA. (e-mail: firstname.lastname@example.org).
Cite:Su-Jane Chen and Juan M. Dempere, "Does Corporate Governance Affect Target IPO Bank Returns Surrounding M&A Announcements," International Journal of Trade, Economics and Finance vol.2, no.1, pp. 72-77, 2011.