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Accounting for distress in bank mergers

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Author Info

  • Koetter, M.
  • Bos, J.W.B.
  • Heid, F.
  • Kolari, J.W.
  • Kool, C.J.M.
  • Porath, D.

Abstract

The inability of most bank merger studies to control for hidden bailouts may lead to biased results. In this study, we employ a unique data set of approximately 1,000 mergers to analyze the determinants of bank mergers. We use data on the regulatory intervention history to distinguish between distressed and non-distressed mergers. We find that, among merging banks, distressed banks had the worst profiles and acquirers perform somewhat better than targets. However, both distressed and non-distressed mergers have worse CAMEL profiles than our control group. In fact, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention. --

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 31 (2007)
Issue (Month): 10 (October)
Pages: 3200-3217

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:10:p:3200-3217

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