Merger reasons and their impact: Evidence from the credit union industry

Abstract Using a unique dataset that includes each merger’s stated motivation, we explore the impact of credit union mergers of varying motivation and institutional size difference. We show that mergers motivated by financial distress lead to significantly more positive changes in earnings and capital ratios compared to mergers aimed at providing expanded services. We also document that target institution members reap most of the benefits in terms of abnormal savings and loan rate changes, although acquirers also benefit on average in distress driven mergers. Overall, our findings are consistent with the efficient management hypothesis and suggest acquirers subsequently utilize the assets of underperforming institutions more efficiently.