Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders

Traditional studies fail to find conclusive evidence that bank mergers crea te value. We analyze a sample of the largest bank mergers between 1985 and 1996. For a subset of this sample, we obtain management estimates of projec ted cost savings and revenue enhancements. We find that recent mergers appe ar to result in positive revaluations of the combined value of bidder and t arget stocks. Although not as large as the present value of management's es timates, with the bulk of the revaluation being attributable to estimated c ost savings rather than projected revenue enhancements. (C) 2001 Elsevier S cience S.A. All rights reserved.