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The safety and soundness effects of bank M&As in the EU: does prudential regulation have any impact?

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Author Info

  • Jens Hagendorff

    (University of Edinburgh)

  • María J. Nieto

    ()
    (Banco de España)

  • Larry D. Wall

    (Federal Reserve Bank of Atlanta)

Abstract

This paper studies the impact of European bank mergers and acquisitions on changes in key safety and soundness measures of both acquirers and targets. We find that capitalization, profi tability and liquidity show signs of statistically and economically significant mean reversion for acquirers. Also, acquirers in cross-border deals tended to perform better when their home country prudential supervisors and deposit insurance funding systems were stricter than the target‘s. For target banks, the most consistent findings from the crosssectional regressions are that stronger supervision and tougher deposit insurance funding regimes tend to result in positive post-merger changes in liquidity and performance

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1236e.pdf
File Function: First version, October 2012
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1236.

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Length: 50 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:bde:wpaper:1236

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Keywords: banks; mergers; Europe;

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  1. Hagendorff, Jens & Hernando, Ignacio & Nieto, Maria J. & Wall, Larry D., 2012. "What do premiums paid for bank M&As reflect? The case of the European Union," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(3), pages 749-759.
  2. Altunbas, Yener & Marqués-Ibáñez, David, 2004. "Mergers and acquisitions and bank performance in Europe: the role of strategic similarities," Working Paper Series, European Central Bank 0398, European Central Bank.
  3. Houston, Joel F. & James, Christopher, 1998. "Do bank internal capital markets promote lending?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(6-8), pages 899-918, August.
  4. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, Springer, vol. 36(2), pages 87-110, December.
  5. Eugene F. Fama & Kenneth R. French, . "Forecasting Profitability and Earnings," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 456, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Ignacio Hernando & María J. Nieto & Larry D. Wall, 2008. "Determinants of domestic and cross-border bank acquisitions in the European Union," Working Paper, Federal Reserve Bank of Atlanta 2008-26, Federal Reserve Bank of Atlanta.
  7. Buch, Claudia M. & DeLong, Gayle, 2008. "Do weak supervisory systems encourage bank risk-taking?," Journal of Financial Stability, Elsevier, Elsevier, vol. 4(1), pages 23-39, April.
  8. Santiago Carbo-Valverde & Edward Kane & Francisco Rodriguez-Fernandez, 2008. "Evidence of Differences in the Effectiveness of Safety-Net Management in European Union Countries," Journal of Financial Services Research, Springer, Springer, vol. 34(2), pages 151-176, December.
  9. Mayes, David G. & Nieto, María J. & Wall, Larry, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Journal of Financial Stability, Elsevier, Elsevier, vol. 4(3), pages 232-257, September.
  10. Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(3), pages 777-88, August.
  11. Allen N. Berger & Rebecca S. Demsetz & Philip E. Strahan, 1998. "The consolidation of the financial services industry: causes, consequences, and implications for the future," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-46, Board of Governors of the Federal Reserve System (U.S.).
  12. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(10), pages 2493-2519, October.
  13. Cheng, David C & Gup, Benton E & Wall, Larry D, 1989. "Financial Determinants of Bank Takeovers: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 21(4), pages 524-36, November.
  14. Timothy H. Hannan & Steven J. Pilloff, 2006. "Acquisition targets and motives in the banking industry," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2006-40, Board of Governors of the Federal Reserve System (U.S.).
  15. Hagendorff, Jens & Collins, Michael & Keasey, Kevin, 2008. "Investor protection and the value effects of bank merger announcements in Europe and the US," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(7), pages 1333-1348, July.
  16. Morris Knapp & Alan Gart & David Becher, 2005. "Post-Merger Performance of Bank Holding Companies, 1987-1998," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 40(4), pages 549-574, November.
  17. Ralph de Haas & Iman van Lelyveld, 2003. "Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis," DNB Staff Reports (discontinued), Netherlands Central Bank 109, Netherlands Central Bank.
  18. Jens Hagendorff & Kevin Keasey, 2009. "Post-merger strategy and performance: evidence from the US and European banking industries," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 725-751.
  19. Elena Beccalli & Pascal Frantz, 2009. "M&A Operations and Performance in Banking," Journal of Financial Services Research, Springer, Springer, vol. 36(2), pages 203-226, December.
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