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The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition

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Listed:
  • Elena Carletti
  • Steven Ongena
  • Jan-Peter Siedlarek
  • Giancarlo Spagnolo

Abstract

The effect of regulations on the banking sector is a key question for financial intermediation. This paper provides evidence that merger control regulation, although not directly targeted at the banking sector, has substantial economic effects on bank mergers. Based on an extensive sample of European countries, we show that target announcement premia increased by up to 16 percentage points for mergers involving control shifts after changes in merger legislation, consistent with a market expectation of increased profitability. These effects go hand-in-hand with a reduction in the propensity for mergers to create banks that are too-big-to-fail in their country.

Suggested Citation

  • Elena Carletti & Steven Ongena & Jan-Peter Siedlarek & Giancarlo Spagnolo, 2019. "The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition," Working Papers 16-14R2, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:161402
    DOI: 10.26509/frbc-wp-201614r2
    Note: this is the second revision of a paper originally published in June of 2016 and revised in July of 2017.
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    References listed on IDEAS

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    More about this item

    Keywords

    regulation; banks; antitrust; mergers and acquisitions; merger control;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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