The Performance of Merger Acquirers: Evidence from Japan’s Banking Crisis in the 1990s

This paper investigates the characteristics and performance of merger acquirers during Japan’s banking crisis in the 1990s. The paper reports the following findings. First, there was a prevalent connection between acquirers and targets via their banks, which were dismally unhealthy. Second, based on various measures of wealth gain, acquiring firms did not gain from their acquisitions. Third, acquirers with stronger bank ties experienced more negative wealth effect than those with weaker bank ties. The overall results shed light on the role of banks in mergers during Japan’s banking crisis. JEL G21, G34, N25 Acknowledgement: A prior version of this paper has benefited from comments by Karan Bhanot, Oyvind Bohren, Larry Brown, Froystein Gjesdal, Don Herrmann, Jun-Koo Kang, Koji Kojima, Erlend Kvaal, John-Christian Langli, Svein Loken, Kankana Mukherjee, Mattias Nilsson, Oghenovo Obrimah, Bernt Arne Odegaard, Katsuhiko Okada, David Reeb, Bill Stammerjohan, Cindy Yoshiko Shirata, Susumu Tokusaki, Wayne Thomas, Takashi Yaekura, Noriaki Yamaji, and participants in meetings sponsored by Kwansei Gakuin University, Louisiana Polytechnic Universtiy, Norwegian School of Economics and Business Administration (NHH), Norwegian School of Management (BI), and the Washington Area Finance Association. The data collection assistance of Madhurima Bhutkar and Sunny Khan is appreciated.