• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2011 Vol.2(1): 72-77 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2011.V2.81

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

Su-Jane Chen and Juan M. Dempere
Abstract—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.

Index Terms—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; e-mail: chens@mscd.edu).
Juan M. Dempere is with Metropolitan State College of Denver, Denver, CO 80122 USA. (e-mail: jdempere@mscd.edu).

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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.

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