Abstract
In this paper, we investigate the short- and long-term wealth effect of OmniAmerican Bancorp’s merger with and into Southside Bancshares. Given that OmniAmerican Bancorp made a ‘take-me-over’ announcement four months before the merger negotiations commenced, which may have given rise to market anticipation, we have employed a longer short-term testing window in order to capture the price run-ups. We show that this acquisition increased OmniAmerican Bancorp’s shareholder wealth by $35.44 million whereas decreased Southside Bancshares’ shareholder wealth by $25.61 million. However, statistically insignificant abnormal returns were found in both the short and long terms for the shareholders of the combined entity, indicating the acquisition’s overall value-neutral nature. This finding appears consistent with the (on average) non-value-destroying results documented in the post-crisis merger wave, but it seems inconsistent with the value-enhancing results observed in intra-state commercial bank mergers. Assuming that gains from the revaluation of the combined value of the bidder and target stocks typically come from the merged entity’s incremental earnings, we conclude that the market’s value-neutral assessment was correct in terms of predicting no significant profit enhancement of the merged entity when full integration of OmniAmerican Bancorp into Southside Bancshares was achieved.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call