Impact of Bank Mergers on Shareholders’ Wealth: A Review of Literature

The main motive of any Merger and Acquisitions (M&As) is to increase of the wealth for the shareholders which in turn forms the main goal of any firm. The main categories of motives identified include those that increase shareholder value and those that destroy shareholder value. Motives which increase shareholder value include; synergy, achievement of economies of scale and scope, increased market power and revenue growth, improvement of managerial efficiency. Motives which decrease shareholder value include managerial hubris, agency and diversification. There are three main types of M&As which are horizontal, vertical and conglomerate. The study lastly examines the methods of financing M&As, the relative size and the number of bidders of the target firms.