The Role of Managerial Incentives in Bank Acquisitions

Charles Hadlock
Joel Houston
Michael Ryngaert

        This paper examines the effect of variables related to management incentives, corporate governance, and performance on the likelihood a bank is acquired.  We find that banks with higher levels of management ownership are less likely to be acquired, particularly in acquisitions where target managers depart from their jobs following the acquisition.  We document that there are high rates of management turnover following bank acquisitions.  This evidence is consistent with an entrenchment hypothesis, where management teams use their ownership positions to block acquisition attempts.  We find little evidence that any other incentive, governance, or performance variables are systematically related to the probability a bank is acquired. 

 Return to the Consolidation of the Financial Services Industry