This paper examines the post merger performance of bank holding companies (BHCs) involved in mergers where the acquired bank holding company was a significant portion of the merged entity. It finds that on average merged BHCs under-perform the industry due to weaknesses in operating costs and credit quality. When mergers are separated into those that outperform the industry and those that under-perform, the significant differences again lie in credit quality and operating expenses. Finally, the paper finds that buyer profitability in the base year is the major predictor of post-merger performance. The better the performance is in the base year, the worse the post-merger results. Base year credit problems in both buyer and seller are correlated with post-merger performance, but are not significant in the regression analysis.
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