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The safety and soundness effects of bank M&As in the EU: does prudential regulation have any impact?

Author

Listed:
  • Jens Hagendorff

    (University of Edinburgh)

  • María J. Nieto

    () (Banco de España)

  • Larry D. Wall

    (Federal Reserve Bank of Atlanta)

Abstract

This paper studies the impact of European bank mergers and acquisitions on changes in key safety and soundness measures of both acquirers and targets. We find that capitalization, profi tability and liquidity show signs of statistically and economically significant mean reversion for acquirers. Also, acquirers in cross-border deals tended to perform better when their home country prudential supervisors and deposit insurance funding systems were stricter than the target‘s. For target banks, the most consistent findings from the crosssectional regressions are that stronger supervision and tougher deposit insurance funding regimes tend to result in positive post-merger changes in liquidity and performance

Suggested Citation

  • Jens Hagendorff & María J. Nieto & Larry D. Wall, 2012. "The safety and soundness effects of bank M&As in the EU: does prudential regulation have any impact?," Working Papers 1236, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1236
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1236e.pdf
    File Function: First version, October 2012
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    References listed on IDEAS

    as
    1. Altunbas, Yener & Marqués, David, 2008. "Mergers and acquisitions and bank performance in Europe: The role of strategic similarities," Journal of Economics and Business, Elsevier, vol. 60(3), pages 204-222.
    2. Hagendorff, Jens & Hernando, Ignacio & Nieto, Maria J. & Wall, Larry D., 2012. "What do premiums paid for bank M&As reflect? The case of the European Union," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 749-759.
    3. Hagendorff, Jens & Collins, Michael & Keasey, Kevin, 2008. "Investor protection and the value effects of bank merger announcements in Europe and the US," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1333-1348, July.
    4. Hernando, Ignacio & Nieto, Mara J. & Wall, Larry D., 2009. "Determinants of domestic and cross-border bank acquisitions in the European Union," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1022-1032, June.
    5. Buch, Claudia M. & DeLong, Gayle, 2008. "Do weak supervisory systems encourage bank risk-taking?," Journal of Financial Stability, Elsevier, vol. 4(1), pages 23-39, April.
    6. Timothy H. Hannan & Steven J. Pilloff, 2009. "Acquisition Targets and Motives in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1167-1187, September.
    7. Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 777-788, August.
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    9. Elena Beccalli & Pascal Frantz, 2009. "M&A Operations and Performance in Banking," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 203-226, December.
    10. Mayes, David G. & Nieto, María J. & Wall, Larry, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Journal of Financial Stability, Elsevier, vol. 4(3), pages 232-257, September.
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    Cited by:

    1. George Kyriazopoulos & Evangelos Drymbetas, 2015. "Long-term Performance of Acquirers Involved in Domestic Bank Ms&As in Europe," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(1), pages 56-67, January.

    More about this item

    Keywords

    banks; mergers; Europe;

    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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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