Change in Bank Equity Stakes before Merger Completion: An Advance Study

The association between changes in institutional financial/investment professionals’ shareholdings and firm-specific characteristics of the acquiring companies prior to merger completion is investigated in this study. As a result, the current research helps to uncover the elements that influence acquiring firms’ investment decisions. To test the popular agency and signalling hypotheses, total and average changes in their ownership are considered. Commercial banks are more inclined to grow their stock holdings in enterprises with increasing current liabilities and deteriorating profitability, according to evidence. The first supports the signalling hypothesis, whereas the second indicates that the agency cost hypothesis is true. Investment banks, on the other hand, favour companies with growing assets and a sound financial position. The desire of more controlling influence over the board of directors is also shown as a competitive relationship amongst these financial specialists before the merger completion date. The association between the financial institutional quarters holdings proportion and the financial features of the bidding enterprises is also investigated using descriptive statistics and logistic regression analysis in this article. Our findings from logistic regression analysis show that commercial banks have more shares in bidding firms than investment banks, implying that commercial banks have more control.

Author (S) Details

Paitoon Chetthamrongch
Department of Marketing, Kasetsart University, Bangkok, Thailand.

Lin Lin
Department of Banking and Finance, National Chi Nan University, Taiwan.

Hsaio-Fen Hsiao
Department of Finance, Ming Dao University, Taiwan.

 Yu-LunHuang
Department of Banking and Finance, National Chi Nan University, Taiwan.

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