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Systemic risk and bank consolidation: International evidence

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  • Weiß, Gregor N.F.
  • Neumann, Sascha
  • Bostandzic, Denefa
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    Abstract

    This paper analyzes the systemic risk effects of bank mergers to test the “concentration-fragility” hypothesis. We use the marginal expected shortfall as well as the lower tail dependence between a bank’s stock returns and a relevant bank sector index to capture the merger-related change in an acquirer’s contribution to systemic risk. In our empirical analysis of a dataset of international domestic and cross-border mergers, we find clear evidence for a significant increase in the merging banks’, the combined banks’ as well as their competitors’ contribution to systemic risk following mergers, thus confirming the “concentration-fragility” hypothesis.

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    Bibliographic Info

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

    Volume (Year): 40 (2014)
    Issue (Month): C ()
    Pages: 165-181

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    Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:165-181

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: M&A; Banks; Consolidation; Systemic risk; Lower tail dependence; Marginal expected shortfall;

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    Cited by:
    1. Weiß, Gregor N.F. & Bostandzic, Denefa & Neumann, Sascha, 2014. "What factors drive systemic risk during international financial crises?," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 78-96.

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