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Systemic risk and bank consolidation: International evidence

  • Weiß, Gregor N.F.
  • Neumann, Sascha
  • Bostandzic, Denefa
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    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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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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