Test bank NHTM-CHAP 19

In recent years banking has ranked in the top five of all U.S. industries in the number of reported merger transactions.

• True

• False

If a bank with a higher stock-price-to-earnings ratio acquires a bank with a lower price-earnings ratio, earnings per share of the combined organization will increase even if combined earnings fall after the merger.

• T

• F

In recent years in the United States bank merger premiums have commonly ranged from 150 to 250 percent.

• T

• F

According to the textbook the financial success of a bank merger depends heavily upon the comparative dollar amounts of earnings reported by the two banking organizations and their relative price-earnings ratios.

• T

• F

A proposed merger between two or more banks must be ratified by the board of directors of each bank involved and by the management of each of the banks and then the merger can proceed once regulators' approval is received.

• T

• F

Under the terms of the Bank Merger Act each federal agency must give top priority to the competitive effects of a proposed merger.

• T

• F

Mergers with anticompetitive effects can only be approved at the federal level if one of the banks involved is failing.

• T

• F

A market area served by one bank which is the only provider of financial services in that market would have an HHI of 100 percent.

• T

• F

A market served by just two banks, equal to each other in size, would have an HHI of 5,000.

• T

• F

According to a recent survey, many European bank mergers in the 1980s and 1990s were motivated by the search for cost savings (economies of scale).

• T

• F