THE MOTIVATIONS FOR BANK TAKEOVERS: SOME EMPIRICAL EVIDENCE FROM ITALY [with DISCUSSION]

Bank takeovers result on average in little improvements in performance. This may be due to conflicting driving forces behind them; however these have seldom been studied. We study directly the motivations for bank acquisitions by analyzing the prices paid for them, under the assumption that bankers are willing to pay for what they want. We find that there is no evidence that bankers are ready to pay for possible economies of scale and scope; on the other hand buyers expect to transfer their superior managerial skills to targets. Market power seems to hold little value while entry (or diversification) commands a premium. Agency issues at the buyer are also an important motivation for takeovers: other things being equal acquirers with more free capital are willing to pay more.