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Governance‐Based Acquisitions And Risk Taking In Banking

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  • VÍCTOR E. BARRIOS
  • LUIS M. GRANERO

Abstract

We examine the market for corporate control in banking when strategic acquisitions are driven by the different governance structures of commercial and savings banks. In contrast to profit‐maximizing entities, we show that savings institutions can have acquisition incentives from their peculiar governance and ownership structure. Governance‐based acquisition incentives, which interact with the specifics of the loan market in affecting bank risk taking, can arise when acquisitions take place sequentially or simultaneously, and also when financial intermediaries affect risk taking directly through the target return of investments or indirectly through the loan interest rate.

Suggested Citation

  • Víctor E. Barrios & Luis M. Granero, 2008. "Governance‐Based Acquisitions And Risk Taking In Banking," Manchester School, University of Manchester, vol. 76(4), pages 369-390, July.
    • Handle: RePEc:bla:manchs:v:76:y:2008:i:4:p:369-390
    DOI: 10.1111/j.1467-9957.2008.01065.x
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    References listed on IDEAS

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    1. Steven J. Pilloff, 2004. "Bank merger activity in the United States, 1994-2003," Staff Studies 176, Board of Governors of the Federal Reserve System (U.S.).
    2. Petri Lehto & Mihkel M. Tombak, 1997. "Consolidations and the Sequence of Acquisitions to Monopoly," CIG Working Papers FS IV 97-22, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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