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Can mergers in Europe help banks hedge against macroeconomic risk?

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Author Info
Pierre-Guillaume Méon
Laurent Weill

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Abstract

This study investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. It is observed that the loan portfolios of European banks are home-biased. The portfolio approach is applied to explore the risk-return efficiency of the locations of banks' activities. Mergers between pairs of banks are also studied. Evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers is also provided.

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Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 5 (March)
Pages: 315-326
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Handle: RePEc:taf:apfiec:v:15:y:2005:i:5:p:315-326

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Shaffer, Sherrill, 1993. "Can megamergers improve bank efficiency?," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 423-436, April. [Downloadable!] (restricted)
  2. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Allen N. Berger, 2000. "The "big picture" of bank diversification," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 162-174.
  4. Chan Huh & Sun Bae Kim, 1994. "Financial regulation and banking sector performance: a comparison of bad loan problems in Japan and Korea," Economic Review, Federal Reserve Bank of San Francisco, pages 18-29. [Downloadable!]
  5. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July. [Downloadable!] (restricted)
    Other versions:
  6. Michelle Clark Neely & David C. Wheelock, 1997. "Why does bank performance vary across states?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-40. [Downloadable!]
  7. Ben Craig & João Cabral dos Santos, 1997. "The risk effects of bank acquisitions," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 25-35. [Downloadable!]
  8. Alan K. Reichert & Larry D. Wall, 2000. "The potential for portfolio diversification in financial services," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 35-52. [Downloadable!]
  9. Goldberg, Michael A. & Levi, Maurice D., 2000. "The European Union as a country portfolio," European Journal of Political Economy, Elsevier, vol. 16(3), pages 411-427, September. [Downloadable!] (restricted)
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  11. Boot, Arnoud W. A., 1999. "European lessons on consolidation in banking," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 609-613, February. [Downloadable!] (restricted)
  12. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank. [Downloadable!]
  13. Altunbas, Yener & Molyneux, Philip & Thornton, John, 1997. "Big-Bank Mergers in Europe: An Analysis of the Cost Implications," Economica, London School of Economics and Political Science, vol. 64(254), pages 317-29, May. [Downloadable!] (restricted)
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  15. Vennet, Rudi Vander, 1996. "The effect of mergers and acquisitions on the efficiency and profitability of EC credit institutions," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1531-1558, November. [Downloadable!] (restricted)
  16. Jeffery W. Gunther & Kenneth J. Robinson, 1999. "Industry mix and lending environment variability: what does the average bank face," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 24-31. [Downloadable!]
  17. H.P. Huizinga & J.H.M. Nelissen & R. Vander Vennet, 2001. "Efficiency Effects of Bank Mergers and Acquisitions," Tinbergen Institute Discussion Papers 01-088/3, Tinbergen Institute. [Downloadable!]
  18. Cybo-Ottone, Alberto & Murgia, Maurizio, 2000. "Mergers and shareholder wealth in European banking," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 831-859, June. [Downloadable!] (restricted)
  19. Altunbas, Yener & Molyneux, Philip, 1996. "Cost economies in EU banking systems," Journal of Economics and Business, Elsevier, vol. 48(3), pages 217-230, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

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  3. Hassan Ayoub & Jérôme Creel & Etienne Farvaque, 2008. "Détermination du niveau des prix et finances: le cas du Liban, 1965-2005," Working Papers DULBEA 08-10.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  8. Jean-Luc De Meulemeester, 2007. "L'Economie de l'Education fait-elle des Progrès? Une Perspective d'Histoire de la Pensée Economique," Working Papers DULBEA 07-15.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  9. Pierre-Richard Agenor & Joshua Aizenman, 2008. "Capital Market Imperfections and the Theory of Optimum Currency Areas," NBER Working Papers 14088, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Pierre-Guillaume Méon & Laurent Weill, 2006. "Does financial intermediation matter for macroeconomic efficiency?," Working Papers DULBEA 06-13.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  12. Pierre-Guillaume Méon & Friedrich Schneider & Laurent Weill, 2007. "Does taking the shadow economy into account matter to measure aggregate efficiency?," Working Papers DULBEA 07-18.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  13. Claudia M. Buch & Gayle L. DeLong, 2008. "Banking Globalization: International Consolidation and Mergers in Banking," IAW Discussion Papers 38, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  14. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," Working Papers DULBEA 09-03.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
  15. Régis Blazy & Laurent Weill, 2007. "The Impact of Legal Sanctions on Moral Hazard when Debt Contracts are Renegotiable," Working Papers DULBEA 07-06.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  16. Peter Egger & Franz R. Hahn, 2006. "Endogenous Bank Mergers and Their Impact on Banking Performance," WIFO Working Papers 271, WIFO. [Downloadable!]
  17. Ilan Tojerow, 2008. "Industry Wage Differential, Rent Sharing and Gender in Belgium," Working Papers DULBEA 08-20.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  18. Henri Capron & Michele Cincera, 2007. "EU Pre-competitive and Near-the-Market S&T Collaborations," Working Papers DULBEA 07-17.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  19. Sîle O'Dorchai, 2008. "Pay inequality in 25 European countries," Working Papers DULBEA 08-06.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
  20. Jérôme de Henau & Leila Maron & Danièle Meulders & Sîle O'Dorchai, 2007. "Travail et Maternité en Europe, COnditions de Travail et Politiques Publiques," Working Papers DULBEA 07-14.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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