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The Role of Regulatory Capital in International Bank Mergers and Acquisitions

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Author Info
Valkanov,Emil
Kleimeier,Stefanie (METEOR)

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Abstract

When investigating the role of regulatory capital in bank mergers and acquisitions (M&As) we finds that i.e. US targets are better capitalized than their acquirers and non-acquired peers and that US banks maintain higher capital than European banks. Thus, US banks strategically raise their capital levels to avoid regulatory scrutiny. Furthermore, more value is created for targets with higher excess capital and in M&As involving targets with considerably higher excess capital ratios than their acquirers. Thus, the excess regulatory capital hypothesis is supported. The market prices the influence that capital has on the probability of the merger’s regulatory approval.

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Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 017.

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Date of creation: 2005
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Handle: RePEc:dgr:umamet:2005017

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Keywords: financial economics and financial management

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