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Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk

  • Pierre-Guillaume Méon
  • Laurent Weill


    (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

This study investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. It is observed that the loan portfolios of European banks are home-biased. The portfolio approach is applied to explore the risk-return efficiency of the locations of banks' activities. Mergers between pairs of banks are also studied. Evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers is also provided.

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Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2003-05.

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Date of creation: 2003
Date of revision:
Handle: RePEc:lar:wpaper:2003-05
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