The effect of bank ownership changes on subsidiary-level earnings

  • Sandra L. Chamberlain
Part of the The New York University Salomon Center Series on Financial Markets and Institutions book series (SALO, volume 3)


This paper investigates whether mergers improve the profitability of 180 bank subsidiaries acquired between 1981 and 1987. Although profitability is unchanged for acquired subsidiaries relative to non-acquired counterparts, specific earnings components improve. In particular, net interest margins widen, and premises expenses and salaries expenses are reduced in the post-merger period. However, these gains are offset by increases in other non-interest expenses, an amalgamation of expenses related to centralized management such as a management fees, advertising expense, research and development expense, director’s fees, and data processing charges. The change in bank ownership is also associated with increases in loan loss provisions and losses from sales of securities in the year the merger is consummated, raising the possibility that ownership changes lead to changes in subsidiary-level earnings management.


Earning Management Paired Difference Control Firm Loan Loss Bank Merger 
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© Springer Science+Business Media Dordrecht 1998

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  • Sandra L. Chamberlain

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