CORPORATE GOVERNANCE AND TARGET IPO BANK RETURNS SURROUNDING M&A ANNOUNCEMENTS

This study examines the relationship between corporate governance and cumulative abnormal returns (CARs) associated with target IPO banks surrounding M&A announcements. Empirical evidence suggests that a majority of the sample banks benefit from M&A announcements. It further shows that the CARs can be positively attributed to D&O insurance coverage and ownership while being negatively linked to board size. However, board independence fails to register any significance. In contrast, bank size, the control variable, persistently shows its significant, negative relationship with respect to target bank stock performance around M&A announcements. Thus, stockholders of small target banks fare better than those of large target banks in mergers and acquisitions.