The interstate banking and branching efficiency act of 1994: A wealth event for acquisition targets

The Interstate Banking and Branching Efficiency Act (IBBEA) represented a significant step in the deregulation of interstate banking and branching. The IBBEA's passage had a positive wealth effect on a sample of large Bank Holding Companies (BHCs). Cross-sectional tests of abnormal returns reveal that BHCs having characteristics associated with acquisition targets and BHCs headquartered in states that prohibited interstate branching experienced significantly higher returns. Collectively, the evidence suggests that investors anticipated that the IBBEA would provide for increased corporate control activities among banks and that a large portion of the BHC gains stems from the relaxation of interstate branching restrictions. (C) 1998 Elsevier Science B.V. All rights reserved.