Does Law Matter for Corporate Governance and M&A Performance in Banks? Evidence Under the Financial Institutions Merger Act in Taiwan

Abstract

AbstractThis study focus on the relation between bank governance and bank merger results under Taiwan’s special regulatory environment in 2000. Adopting governance variables (executive remuneration, managerial ownership, and board diversity), we find that managerial ownership is positively related to bank merger results and that board size is negatively correlated with bank mergers’ performance. This study supports sound governance mechanisms to prevent banks from pursuing a value-loss merger and acquisition (M&A). Our results offer the insight that internal bank governance structures play bigger role upon the value effects from bank mergers. Thus, regulators may elevate the performance of bank M&A by enhancing corporate governance codes