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Do "white knights" make excessive profits in bank resolution?

Author

Listed:
  • Heider, Florian
  • Schlegel, Jonas
  • Tröger, Tobias
  • Wahrenburg, Mark

Abstract

This study looks at potential windfall profits for the four banking acquisitions in 2023. Based on accounting figures, an FT article states that a total of USD 44bn was left on the table. We see accounting figures as a misleading analysis. By estimating marked-based cumulative abnormal returns (CAR), we find positive abnormal returns in all four cases which when made quantifiable, are around half of the FT's accounting figures. Furthermore, we argue that transparent auctions with enough bidders should be preferred to negotiated bank sales. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.

Suggested Citation

  • Heider, Florian & Schlegel, Jonas & Tröger, Tobias & Wahrenburg, Mark, 2023. "Do "white knights" make excessive profits in bank resolution?," SAFE White Paper Series 98, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:280399
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    References listed on IDEAS

    as
    1. Swary, Itzhak, 1986. "Stock Market Reaction to Regulatory Action in the Continental Illinois Crisis," The Journal of Business, University of Chicago Press, vol. 59(3), pages 451-473, July.
    2. Cowan, Arnold R. & Salotti, Valentina, 2015. "The resolution of failed banks during the crisis: Acquirer performance and FDIC guarantees, 2008–2013," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 222-238.
    3. James, Christopher M & Wier, Peggy, 1987. "Returns to Acquirers and Competition in the Acquisition Market: The Case of Banking," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 355-370, April.
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    More about this item

    Keywords

    Bank Resolution; Bank Acquisition; Auctions; Event Study;
    All these keywords.

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