Quarterly publication of the Multinational Finance Society     ISSN 1096-1879

Special Issue on Banking Edited by Professor Antony Saunders

Technical Efficiency of Large Bank Production in Asia and the Pacific
(Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 1–22)

Milind Sathye
University of Canberra, Australia

This study investigates the efficiency of large commercial banks in Asia and the Pacific region. In particular, the overall technical efficiency, pure technical efficiency and scale efficiency has been estimated, the factors (including, the environmental factors) that influence efficiency of banks in the region have been explained and the mean efficiency of large banks in different countries of the region has been compared. The study found that when the national frontier was expanded to regional frontier, the efficiency scores declined, the environmental variables had significant influence on efficiency scores and developed countries showed pure technical efficiency score significantly higher than the less developed countries. Hence, going by the global advantage hypothesis a surge in mergers and acquisitions of banks in this region is predicted (JEL: O2, G2, G21, G28, E58, E61, F33, L5).

Keywords: bank efficiency, data envelopment analysis, Asia-Pacific.

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Managerial Cost Inefficiency and Takeovers of U.S. Thrifts
(Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 23–42)

Fatma Cebenoyan
Hunter College-CUNY, U.S.A.
A. Sinan Cebenoyan
Hofstra University, U.S.A.
Elizabeth S. Cooperman
University of Colorado at Denver, U.S.A.

This paper uses a two-step methodology to examine the relationship between managerial cost inefficiency and the takeover of U.S. thrifts during a period of market liberalization and widespread takeover activity, 1994 to 2000. In the first stage using stochastic cost frontiers, controllable managerial cost inefficiency scores are estimated for all stock firms operating each year in 1994 to 2000. In a second stage, these scores are used to examine correlates of takeovers, focusing on cost inefficiency. For takeovers by banks, a significant negative relationship between cost inefficiency and takeover is found, suggesting an exit of more cost efficient firms from the thrift industry during this period. However, takeovers by thrifts are associated with other characteristics (JEL: G21, G33, G34).

Keywords:depository institutions, thrifts, takeovers and cost inefficiency.

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What’s Happened at Divested Bank Offices? An Analysis of Antitrust Divestitures in Bank Mergers in the U.S.
(Multinational Finance Journal, 2005, vol. 9, no. 1 & 2, pp. 43–71)

Steven J. Pilloff*
Hood College, U.S.A.

In their competitive analysis of proposed bank mergers, the Board of Governors of the Federal Reserve System, the U.S. Department of Justice, and other U.S. banking agencies accept branch divestitures as an antitrust remedy in local markets where there is substantial overlap between the acquirer and target. The results of this study, which examines the performance of 751 branches that were divested between June 1989 and June 1999 in conjunction with a merger in the U.S. that raised possible competition issues, are consistent with the policy of accepting branch divestitures as an antitrust remedy being successful. Divested branches operate for lengths of time that are comparable to all branches, and even though they experience substantial deposit runoff around the time of the merger, divested branches subsequently exhibit deposit growth rates that are comparable to those of other similar branches (JEL: L40, G21, G34).

Keywords:divestiture, bank merger, antitrust policy and remedy, competition.

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Market Response to Announcements of Mergers of Canadian Financial Institutions
(Multinational Finance Journal, 2005, vol. 9, no. 1/2, pp. 73–100)

Sebouh Aintablian
Lebanese American University, Lebanon
Gordon S. Roberts
York University, Canada

This study examines a sample of mergers of Canadian Financial Institutions during the 1990’s to determine whether in-pillar, cross-pillar and foreign mergers are value-enhancing, and to determine possible sources of synergies behind those mergers. It develops testable hypotheses for Canadian FI mergers by synthesizing prior U.S. tests in the context of Canadian institutional arrangements. The overall results support the generality of findings of prior U.S. studies that the average abnormal return for both the acquiring and target firms is positive and statistically significant. This result suggests that acquisitions in the financial industry are, in Canada as elsewhere, driven by value-maximizing motivations. The study also shows that acquiring institutions’ shareholders benefit more when the acquisition is of a similar type (in-pillar) and domestic (JEL: G21).

Keywords: Bank merger announcements, Canada.

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Effect of Monetary Policy on Commercial Banks Across Different Business Conditions
(Multinational Finance Journal, 2005, vol.9, no.1/2, pp. 101–130)

Syed M. Harun
Texas A&M University-Kingsville, USA
M. Kabir Hassan
University of New Orleans, USA
Tarek S. Zaher
Indiana State University, USA

The objective of the paper is to investigate whether the stock price reactions of commercial banks to monetary policy actions are dependent on the state of the economy. The results indicate that monetary policy actions have asymmetric effects on the returns of commercial banks across different monetary policy and business environments. The asymmetric effects can primarily be attributed to the asymmetric effects of monetary policy on discount rates across different monetary and business environments. We also observe that the impact of monetary policy on the returns of commercial banks is affected by bank-specific characteristics. Bank size, leverage and profitability play an important role in explaining the cross-sectional variation in bank returns as a result of monetary policy changes. We find that cross-sectional bank-specific characteristics affect the bank returns asymmetrically as a result of monetary policy changes across different business conditions. The results suggest that the effectiveness of monetary policy depends on the states of the economy (JEL: E52, E58, G14, G21).

Keywords: Monetary policy, commercial bank, business condition.

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