Do Financial Policy Makers Use Financial Theory: The Case Of S&L And BHC Merger Regulation

Abstract

The potential for risk reduction through free market merger activity between savings and loan associations (S&Ls) and bank holding companies (BHCs) in the late 1970s and early 1980s is the focus of this research. Analysis using event study methodology, the efficient portfolio approach of Markowitz (1952), and select financial and accounting performance measures illustrates the potential risk reduction benefits from merger activity between S&Ls and BHCs that existed during the study period.