Geographic strategies in mergers and acquisitions by financial institutions

We examine the impacts of geographic strategy of mergers and acquisitions by financial institutions on their short-run and long-run stock price performance, risk, and operating performance. The geographic strategies include 'in-market,' 'partial-overlapping,' and 'market-expanding' acquisitions. While the market initially reacts more favourably towards 'market-expanding' acquisitions, acquirers in these acquisitions experience the lowest long-run stock price performance and largest increase in total return volatility and idiosyncratic risk. Acquirers in partial-overlapping acquisitions experience the most deterioration in operating performance. Our results are robust to different measures of geographic expansion and subsample analysis. These findings have geographic implications for the banking industry regarding expansion through acquisition.