| In the past several decades the banking industry has undergone dramatic transformation and consolidation as the regulatory, financial, and global environment has changed. In particular, changes in the regulatory and financial environment within the last twenty years have driven the most recent wave of mergers in the industry, with the denoument of legislation being the Graham-Leach-Blily Act passed in 1999.; Of possibly equal, if not greater, significance in the last twenty years has been the metamorphosis of financial products available to financial professionals. The most notable of these new products being financial derivatives, which provide for the transference or sharing of financial risk to/with others, often on a global scale. Undoubtedly, these new products have altered the financial landscape and altered risk premia and money flows worldwide. In turn, impacting foreign direct investment, exchange rates, and the risk premia for most publicly traded securities, and equity markets worldwide. These products have made it possible to raise capital, and transfer risk, at the speed of light---undoubtedly, impacting the mergers and acquisitions business.; There has been a wide ranging debate in the economics and finance literature for many years as to what are the primary determinants of the premium to book value paid in mergers and acquisitions in the banking industry; their relative importance and impact in determining the final offering price; and how they might affect the merge or acquire decision on the part of management.; This study examines multiple aspects of this question by looking at financial, market, and macroeconomic factors simultaneously to determine their impact on the level of the premium to book value paid in mergers and acquisitions in the banking industry. Unlike much of the other work in this arena, the author also looks at global macroeconomic and market factors to determine the level of influence they have on the variance in premium to book value paid.; The author discovered that, indeed, macroeconomic and market factors are as much of a determinant of premium paid, in the final analysis, as financial or operating variables, alone. |
