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Bank mergers and components of risk: An evaluation

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  • Suchismita Mishra
  • Arun Prakash
  • Gordon Karels
  • Manferd Peterson

Abstract

The present study empirically examines the contribution of the acquired banks in only the nonconglomerate types of mergers (i.e., banks with banks), where the bulk of the payment is in the form of equity to the acquiring bank and finds overwhelmingly statistically significant evidence that nonconglomerate types of mergers definitely reduce the total as well as the unsystematic risk while having no statistically significant effect on systematic risk. Therefore, it seems that diversification may be a possible motive for bank mergers. Copyright Springer 2005

Suggested Citation

  • Suchismita Mishra & Arun Prakash & Gordon Karels & Manferd Peterson, 2005. "Bank mergers and components of risk: An evaluation," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(1), pages 85-96, March.
    • Handle: RePEc:spr:jecfin:v:29:y:2005:i:1:p:85-96
    DOI: 10.1007/BF02761544
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    References listed on IDEAS

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    1. Melicher, Ronald W & Rush, David F, 1973. "The Performance of Conglomerate Firms: Recent Risk and Return Experience," Journal of Finance, American Finance Association, vol. 28(2), pages 381-388, May.
    2. Hamada, Robert S, 1969. "Portfolio Analysis, Market Equilibrium and Corporation Finance," Journal of Finance, American Finance Association, vol. 24(1), pages 13-31, March.
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    Cited by:

    1. Dzhagityan, Eduard, 2012. "The effect of ex post risks on post-M&A performance efficiency," MPRA Paper 63147, University Library of Munich, Germany.
    2. Vallascas, Francesco & Hagendorff, Jens, 2011. "The impact of European bank mergers on bidder default risk," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 902-915, April.
    3. Austin, Rebekah E. & Dunham, Lee M., 2022. "Do FinTech acquisitions improve the operating performance or risk profiles of acquiring firms?," Journal of Economics and Business, Elsevier, vol. 121(C).
    4. Brealey, Richard A & Cooper, Ian A & Kaplanis, Evi, 2019. "The effect of mergers on US bank risk in the short run and in the long run," Journal of Banking & Finance, Elsevier, vol. 108(C).
    5. Ivo Jansen & Lee Sanning & Nathan Stuart, 2015. "Do hubris and the information environment explain the effect of acquirers’ size on their gains from acquisitions?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(2), pages 211-234, April.

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