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The impacts of stricter merger legislation on bank mergers and acquisitions: Too-Big-To-Fail and competition

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  • Carletti, Elena
  • Ongena, Steven
  • Siedlarek, Jan-Peter
  • Spagnolo, Giancarlo

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.

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  • Carletti, Elena & Ongena, Steven & Siedlarek, Jan-Peter & Spagnolo, Giancarlo, 2021. "The impacts of stricter merger legislation on bank mergers and acquisitions: Too-Big-To-Fail and competition," Journal of Financial Intermediation, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:jfinin:v:46:y:2021:i:c:s1042957320300139
    DOI: 10.1016/j.jfi.2020.100859
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    More about this item

    Keywords

    Banks; Regulation; Mergers and acquisitions; Merger control; Antitrust;
    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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