Banks´ Corporate Governance and Merger

In order to explore what corporate governance characteristics are associated with mergers in the banking industry, the sample of publicly traded banks in different countries between 2005 and 2007 and a variety of empirical methods are used in this paper. By introducing matched sample comparison, univariate comparison and multivariate comparison, the differences between the sample banks that do and do not become merger targets are explored. Empirical results show outside shareholders and blockholders appear to be primarily responsible for encouraging bank managers to accept an attractive merger offer. Empirical results also show a greater frequency of outside blockholders in the banks would become merger targets. A strong and consistent link between outside director equity ownership and banks becoming takeover targets is documented in this paper.