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on Banking |
| By: | Maarten van Oordt; Chen Zhou |
| Abstract: | In this study we disentangle two dimensions of banks' systemic risk: the level of bank tail risk and the linkage between a bank's tail risk and severe shocks in the financial system. We employ a measure of the systemic risk of financial institutions that can be decomposed into two subcomponents reflecting these dimensions. Empirically, we show quantitatively how bank characteristics are related to bank tail risk and systemic linkage. The interrelationship between bank characteristics and these dimensions determine the relation between bank characteristics and systemic risk. Certain characteristics that are irrelevant to the soundness of a financial institution taken in isolation turn out to be important for the level of systemic risk, and vice versa. Our analytical framework helps to evaluate differences in direction and scope of policy under the micro- and macro-prudential objectives of regulation. |
| Keywords: | Financial institutions; financial stability; tail risk; macroprudential regulation; non-interest income |
| JEL: | G10 G21 G28 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:442&r=ban |
| By: | Hasan, Iftekhar (Fordham University and Bank of Finland); Jackowicz , Krzysztof (Kozminski University); Kowalewski, Oskar (Institute of Economics of the Polish Academy of Sciences (INE PAN)); Kozlowski , Lukasz (BGZ SA) |
| Abstract: | In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at lower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreign-owned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries. |
| Keywords: | small-business lending; cooperative banks; foreign banks; post-transition countries |
| JEL: | G21 G28 |
| Date: | 2014–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2014_022&r=ban |
| By: | Varvara Isyuk (Centre d'Economie de la Sorbonne et National Bank of Belgium) |
| Abstract: | In the second half of 2008, after a series of bankruptcies of large financial institutions, the U.S. Treasury poured capital infusions into domestic financial institutions under the Capital Purchase Program (CPP), thus helping to avert a complete collapse of the U.S. banking sector. In this article the effectiveness of the Capital Purchase Program is analysed in terms of restoring banks' loan provisions. The relative impacts of liquidity shortages (which negatively affected banks' willingness to lend) and the contraction in aggregate demand for bank loans are examined. The empirical evidence on the effects of capital shortages supports the theory. Banks that have a higher level of capitalisation tend to lend more both during the crisis and in normal times. Moreover, it is found that bailed-out banks displayed higher growth rates of loans during the crisis than in normal times (before 2008) as well as higher rates compared with non-bailed banks during the crisis, with a one percentage point increase in the capital ratio. In addition, bailed-out banks that repurchased their shares from the U.S. Treasury provided more loans during the crisis than those banks that did not. |
| Keywords: | Capital Purchase Program, bank lending, credit growth, liquidity provisions. |
| JEL: | E58 G21 G28 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:14062&r=ban |
| By: | Swamy, Vighneswara |
| Abstract: | This study models the impact of new capital regulations proposed under Basel III on bank profitability by constructing a stylized representative bank’s financial statements. We show that the higher cost associated with a one-percentage increase in the capital ratio can be recovered by increasing lending spreads. The results indicate that in the case of scheduled commercial banks, one-percentage point increase in capital ratio can be recovered by increasing the bank lending spread by 31 basis points and would go upto an extent of 100 basis points for six-percentage point increase assuming that the risk weighted assets are unchanged. We also provide the estimations for the scenarios of changes in risk weighted assets, changes in return on equity (ROE) and the cost of debt. |
| Keywords: | Banks, Regulation, Basel III, Capital, Interest Income |
| JEL: | E44 E51 E61 G2 G21 G28 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58298&r=ban |
| By: | Ryan N. Banerjee; Hitoshi Mio |
| Abstract: | To the best of our knowledge, this is the first study to estimate the effect of liquidity regulation on bank balance sheets. It takes advantage of the fact that not all banks were made subject to tighter liquidity regulation by the UK Financial Services Authority (FSA) in 2010. Under this new regulation a subset of banks operating in the UK were required to hold a sufficient stock of high quality liquid assets (HQLA) to withstand two scenarios of stressed funding conditions. We find that banks adjusted both their asset and liability structures to meet tighter liquidity requirements. Banks increased the share of HQLA and funding from more stable UK non-financial deposits while reducing the share of short-term intra-financial loans and short-term wholesale funding. We do not find evidence that the tightening of liquidity regulation had an impact on the overall size of bank balance sheets or a detrimental impact on lending to the non-financial sector either through reduced lending supply or higher interest rates on loans. Overall, in response to tougher liquidity regulation, banks replaced claims on other financial institutions with cash, central bank reserves and government bonds – and so reduced the interconnectedness of the banking sector without affecting lending to the real economy. |
| Keywords: | Banking, liquidity regulation, average treatment effect |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:470&r=ban |
| By: | Molyneux , Philip (BOFIT); Liu, Hong (BOFIT); Jiang , Chunxia (BOFIT) |
| Abstract: | We investigate ownership effects on capital and adjustments speed to the target capital ratio in China from 2000 to 2012 and find that state-owned banks hold higher levels of capital than banks of other ownership types. Foreign banks are more highly capitalized than local non-state banks but under-capitalized compared with the bigger non-state banks with nationwide presence. Foreign banks adjust risk-weighted capital towards their optimal targets at a slower speed than domestic banks, while foreign minority ownership results in a faster adjustment process. Capital is positively influenced by profitability, asset diversification and liquidity risk, but negatively influenced by bank market power. Capital ratios typically co-move with the business cycle although this relationship is reversed during the crisis period due to active government intervention. Our results are robust to various modelling specifications and have important policy implications. |
| Keywords: | banking; capital; adjustment; ownership; China |
| JEL: | C32 G21 G28 |
| Date: | 2014–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2014_016&r=ban |
| By: | Xavier Freixas; Kebin Ma |
| Abstract: | This paper reexamines the classical issue of the possible trade-offs between banking competition and financial stability by highlighting different types of risk and the role of leverage. By means of a simple model we show that competition can affect portfolio risk, insolvency risk, liquidity risk, and systemic risk differently. The effect depends crucially on banks’ liability structure, on whether banks are financed by insured retail deposits or by uninsured wholesale debts, and on whether the indebtness is exogenous or endogenous. In particular we suggest that, while in a classical originate-to-hold banking industry competition might increase financial stability, the opposite can be true for an originate-to-distribute banking industry of a larger fraction of market short-term funding. This leads us to revisit the existing empirical literature using a more precise classification of risk. Our theoretical model therefore helps to clarify a number of apparently contradictory empirical results and proposes new ways to analyze the impact of banking competition on financial stability. |
| Keywords: | banking competition, financial stability, leverage |
| JEL: | G21 G28 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:781&r=ban |
| By: | Manish K. Singh (Faculty of Economics, University of Barcelona); Marta Gómez-Puig (Faculty of Economics, University of Barcelona); Simón Sosvilla-Rivero (Faculty of Economics, Complutense University of Madrid) |
| Abstract: | Based on contingent claims analysis (CCA), this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union (EMU) countries using a market based measure \distance-to-default" (DtD). It analyzes the individual and aggregated series for a comprehensive set of banks in each eurozone country over the period 2004-Q4 to 2013-Q2. Given the structural di_erences in _nancial sector and banking regulations at national level, the indices provide a useful indicator for monitoring country speci_c banking vulnerability and stress. We _nd that average DtD indicators are intuitive, forward-looking and timely risk indicators. The underlying trend, uctuations and correlations among indices help us analyze the interdependence while cross-sectional di_erences in DtD prior to crisis suggest banking sector fragility in peripheral EMU countries. |
| Keywords: | contingent claim analysis, distance-to-default, systemic risk JEL classification: G01, G21, G28 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201421&r=ban |
| By: | Stefan Arping (University of Amsterdam) |
| Abstract: | This article presents a model in which, contrary to conventional wisdom, competi- tion can make banks more reluctant to take excessive risks: As competition intensifies and margins decline, banks face more-binding threats of failure, to which they may respond by reducing their risk-taking. Yet, at the same time, banks become riskier. This is because the direct, destabilizing effect of lower margins outweighs the disciplining effect of competition; moreover, a substantial rise in competition reduces banks’ incentive to build precautionary capital buffers. A key implication is that the effects of competition on risk-taking and on failure risk can move in opposite directions. |
| Keywords: | Charter Value Hypothesis, Bank Franchise Value, Bank Competition, Financial Stability, Capital Requirements |
| JEL: | G2 G3 |
| Date: | 2014–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20140059&r=ban |
| By: | Occhino, Filippo (Federal Reserve Bank of Cleveland) |
| Abstract: | This paper studies how a worsening of the debt overhang distortion on bank lending can explain banking solvency crises that are accompanied by a plunge of bank asset values and by a severe contraction of lending and economic activity. Since the value of bank assets depends on economic prospects, a pessimistic view of the economy can be self-fulfilling and can trigger a financial crisis: If economic prospects are poor, bank asset values decline, the bank risk of default rises, and the associated debt overhang distortion worsens. The worsening of the distortion leads to a contraction in bank loans and a decline in economic activity, which confirms the initial pessimistic view. Signals of the existence of systemic risk include: a rise in the volatility and the presence of two modes in the probability distribution functions of the returns of bank-issued bonds and of portfolios of bank-issued bonds and equities; and a surge in the correlation between bank-issued bond returns. Macroprudential policy should limit the sensitivity of bank balance sheets to the aggregate economy and to the financial sector, using investment restrictions, capital requirements, and stress tests. In the event of a crisis, policy options include reducing the above sensitivity with commitments and guarantees, stimulating the economy, and restructuring bank capital and ownership. |
| Keywords: | Debt overhang; bank interconnectednss; multiple equilibria; financial contagion; financial fragility; systemic risk; macroprudential policy; stress tests |
| JEL: | G01 G28 |
| Date: | 2014–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1425&r=ban |
| By: | Karkowska, Renata |
| Abstract: | Systemic risk is a very important but very complex notion in banking and how to measure it adequately is challenging. We introduce a new framework for measuring systemic risk by using a risk-adjusted balance sheet approach. The measure models credit risk of banks as a put option on bank assets, a tradition that originated with Merton. We conceive of an individual bank’s systemic risk as its contribution to the potential sector-wide net. In this regard, the analysis of public commercial banks operating in 7 countries from Central and Eastern Europe, shows potential risk which could threaten all the financial system. The paper shows how risk management tools can be applied in new ways to measure and analyze systemic risk in European banking system. The research results is a systemic risk map for the CEE banking systems. The study finds also instability of systemic risk determinants. |
| Keywords: | systemic risk, banking system, instability, emerging markets, Merton option model |
| JEL: | A10 C01 C32 C58 G13 G21 G32 G33 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58803&r=ban |
| By: | Peter Spahn |
| Abstract: | The growth and deepening of financial markets entailed the expectation that the bank lending channel of monetary policy transmission would lose its importance. The paper explains why, on the contrary, the banking sector has become a major locus of origination and amplification of macro-financial shocks. Mutual feedback mechanisms between the financial and the real sector are analysed and simulated by using a simple standard macro model with an integrated banking system. A comparison of the efficiency of various Taylor Rule extensions explores whether monetary stabilisation can be improved by additional interest rate reactions to asset prices, bank lending, bank leverage or the spread between the loan and the policy rate. |
| Keywords: | Monetary policy transmission, credit market, leverage targeting, risk-taking channel, asset market shocks |
| JEL: | E1 E5 G2 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:rmn:wpaper:201409&r=ban |
| By: | UESUGI Iichiro; UCHIDA Hirofumi; MIZUSUGI Yuta |
| Abstract: | Employing massive contract- and firm-level data provided by the Small and Medium Enterprise (SME) Unit of the Japan Finance Corporation (JFC), one of the largest government lending institutions for SMEs, and linking the data with other firm-level data from a business credit information company, we empirically examine (1) the lending behavior of JFC to SMEs, (2) the effects of JFC's lending on the credit availability and the ex-post performance of its borrowers, and (3) the role of JFC's information production. As for (1), JFC's lending behavior, we find (1-a) a statistically significant association between JFC's lending decision and a variety of variables including those from borrowers' financial statements, (1-b) JFC's counter-cyclical lending behavior to SMEs, and (1-c) a reduced emphasis on loans collateralized by real estate properties in recent years. As for (2), effects of JFC's lending, we find (2-a) its significant positive impact on borrowers' credit availability, capital investment, and employment, (2-b) occasional complementarities between JFC loans and loans provided by other financial institutions, and (2-c) no definitive evidence for its positive impact on the borrowers' ex-post performance including their profitability and the probabilities of having financial distress. As for (3), JFC's information production, we find evidence suggesting that JFC's internal credit ratings have sufficient power in identifying firms that are likely to survive and that the ratings are more informative than financial statement information. |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:14045&r=ban |
| By: | el Alaoui, AbdelKader; Diwandaru, Ginanjar; Rosly, Saiful Azhar; Masih, Mansur |
| Abstract: | Traditionally, the main role of the bank is to offer loans to its customers, to facilitate the intermediary role in the financial market between the investors and feed the need of the big corporations in terms of investment. This study is an attempt to analyze, at the same time, the impact of three factors that are involved in the income of the European banks. The first two are endogenous to the bank and the third one is deemed, a priori, to be exogenous to the bank. Our objective is to look at the influence of “Fee & commissionsâ€, the “Net Non-interest income†and the interest rate on banks’ profitability in a panel data of 34 banks chosen from different European countries. The interest rate of reference is supposed to be under the control of the central bank but subject to movement due to the interactions between the cross-border countries and the competitive framework within the same country. The “Fee & commissions†and the “Net Non-interest income†are more related to the efficiency of the management team and the effectiveness of the processing inside the same bank. Our main finding is that the “Fee & commissions†are not really influencing the profitability of the European banks. However, the “Net Non-interest income†and the interest rate are significantly impacting the profitability of the European banks. |
| Keywords: | Banking System, Regulation, Fee and commissions, Bank Profitability, panel data |
| JEL: | C22 C58 G21 G28 |
| Date: | 2014–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59606&r=ban |
| By: | Jon Frost; Ruben van Tilburg |
| Abstract: | This paper empirically examines the impact of capital flows on credit growth, credit excesses and banking crises using quarterly panel data from 43 advanced (AEs) and emerging market economies (EMEs). Regressions show that gross capital inflows precede credit growth and credit excesses. Both gross inflows and high private domestic credit precede banking crises. Formalized hypotheses allow us to study whether domestic or international drivers more frequently precede banking crises, and thus to evaluate "financial globalization" and the "great financial expansion" as explanations for country vulnerability to banking crises. Our evidence provides support for both narratives as drivers of country vulnerability; financial globalization seems to matter particularly for EMEs. We also provide some ground for caution on the effectiveness of capital controls and the desirability of very high levels of private credit to GDP. |
| Keywords: | Gross capital flows; credit bubbles; financial globalization; banking crises |
| JEL: | E51 F32 G01 G15 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:441&r=ban |
| By: | Roy Zilberman; William Tayler |
| Abstract: | This paper studies the interactions between loan loss provisioning rules, business cycle fluctuations and monetary policy in a model with nominal price rigidities, a borrowing cost channel and endogenous risk of default. We show that an empirically relevant backward-looking provisioning rule induces financial accelerator mechanisms and results in financial, price and macroeconomic instability. Forward-looking provisioning systems, set to cover for expected losses over the whole business cycle, reduce significantly procyclicality in prices and output, and in addition moderate the (otherwise optimal) anti-inflationary response in the monetary policy rule. The optimal policy response to financial shocks calls for a combination of forward-looking provisions and a mildly credit augmented monetary policy rule. |
| Keywords: | Loan loss provisions, procyclicality, borrowing cost channel, Basel III, forward-looking provisions, monetary policy |
| JEL: | E32 E44 E52 E58 G28 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:68464009&r=ban |
| By: | Swamy, Vighneswara |
| Abstract: | In a move towards effective management of interest rate risk in Indian banking, in addition to the existing return on Interest Rate Sensitivity under Traditional Gap Analysis, a new return is being introduced to monitor the interest rate risk using Duration Gap Analysis (DGA), called Interest Rate Sensitivity under Duration Gap Analysis (IRSD). The DGA involves bucketing of all Risk Sensitive Assets (RSA) and Risk Sensitive Liabilities (RSL) as per residual maturity/re-pricing dates in various time bands and computing the Modified Duration Gap (MDG). One of the important things to note is that the RSA and RSL include the rate-sensitive off-balance sheet assets and liabilities as well. MDG can be used to evaluate the impact on the Market Value of Equity (MVE) of the bank under different interest rate scenarios. The past few years have seen banks’ foray into financing long-term assets, such as home loans and infrastructure projects. Banks have been allowed to raise funds through long-term bonds with a minimum maturity of five years to the extent of their exposure of residual maturity of more than five years to the infrastructural sector. This article attempts to illustrate the significance of interest rate risk management and approaches towards its management in the Indian context. |
| Keywords: | Interest Rate Risk Management, Duration Gap Analysis, Maturity Gap Analysis, Risk Sensitivity, Modified Duration Gap, Banking Risk |
| JEL: | E40 E43 E44 G20 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58342&r=ban |
| By: | Chowdhury, Shyamal; Roy Chowdhury, Prabal; Sengupta, Kunal |
| Abstract: | This paper develops a theory of sequential lending in groups in micro-finance that centers on the notion of dynamic incentives, in particular the simple idea that default incentives should be relatively uniformly distributed across time. In a framework that allows project returns to accrue over time, as well as strategic default, we show that sequential lending can help resolve problems arising out of coordinated default, thus improving project efficiency vis-a-vis individual lending. Inter alia, we also provide a justification for the use of frequent repayment schemes, as well as demonstrate that, depending on how it is manifested, social capital has implications for project efficiency and borrower default. We next examine the optimal choices for the MFI and derive conditions for the optimality of the group lending arrangement. Our framework also provides for some plausible hypotheses as to why there has been a recent transition from group to individual lending. |
| Keywords: | Collusion; coordinated default; dynamic incentives; frequent repayment; group-lending; MFI competition; micro-finance; sequential financing; social capital; switch to individual lending |
| JEL: | D7 D9 G2 O2 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58675&r=ban |
| By: | pan, lingyao |
| Abstract: | With the implementation of the "Basel III", banks need more capital to cover risks. The changing rules of capital will be different from the previous. Taking Morgan as an example, a top-down method is used to calculate its economic capital. Then, by comparing with the reported economic capital, the result shows Morgan has considered pro-cyclicality and made a great counter cyclical adjustment. In order to provide regulatory authority a reasonable method to know well the risk of commercial banks, the top-down economic capital measure model is counter cyclical modified. |
| Keywords: | Economic capital; Top-down method; Pro-cyclicality; Counter cyclical adjustment |
| JEL: | C6 G2 |
| Date: | 2014–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58822&r=ban |
| By: | Hull, Isaiah (Research Department, Central Bank of Sweden) |
| Abstract: | A standard, no-recourse mortgage contract does not adjust when the value of the underlying collateral falls. Consequently, shocks that lower house prices may trigger one of the necessary conditions for default: negative equity. A common alternative contract attempts to prevent default by imposing full-recourse. This may cause individuals who believe they are likely to default to rent; however, it does not prevent those who buy from experiencing negative equity. I consider a contract that instead precludes negative equity by tying outstanding debt to an index of house prices. This is done in an incomplete markets model that is calibrated to match U.S. micro and macro data. I find that switching to the house price indexed contract reduces the default rate from .72% to .11% and expands homeownership rates among the young and the poor, but pushes up the equilibrium minimum mortgage rate by 90 basis points. The volatility of net cash flows to financial intermediaries also increases slightly under the new contract. |
| Keywords: | Default; Mortgages; Interest Rates; Heterogeneous Agents; Incomplete Markets |
| JEL: | E21 E43 G21 |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0287&r=ban |
| By: | Nargiza Alimukhamedova (CERGE-EI) |
| Abstract: | The paper describes the microfinance environment in Uzbekistan, with an emphasis on two types of non-bank microfinance institutions – Credit Unions and Microcredit Organizations. The specific nature of these institutions provides new evidence of the commercially oriented microcredit model and SME lending, which is an emerging trend in mainstream microfinance. The paper offers two important contributions. On the supply side of microcredits, we analyse the determinants of initial placement of these MFIs in districts of Uzbekistan. We find that MFIs follow general economic principles when choosing the location for establishment. On the demand side, we analyse the actual margins of excess demand for microcredits by considering only the pool of eligible applicants. We find that the total probability of microcredit approval is on average only 0.5, which implies that the actual margins of untapped market could be just half of that projected when the narrow definition of eligible applicants is taken into account. |
| Keywords: | microcredit, microfinance institutions, credit unions |
| JEL: | O16 C34 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ost:wpaper:344&r=ban |
| By: | Chakroun, Fatma; Abid, Fathi |
| Abstract: | This paper considers the optimal asset allocation strategy for bank with stochastic interest rates when there are three types of asset: Bank account, loans and securities. The asset allocation problem is to maximize the expected utility from terminal wealth of a bank's shareholders over a finite time horizon. As a consequence, we apply a dynamic programming principle to solve the Hamilton-Jacobi-Bellman (HJB) equation explicitly in the case of the CRRA utility function. A case study is given to illustrate our results and to analyze the effect of the parameters on the optimal asset allocation strategy. |
| Keywords: | Bank asset allocation, Stochastic interest rates, Dynamic programming principle, HJB equation, CRRA utility. |
| JEL: | G21 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59295&r=ban |
| By: | John Cotter (UCD School of Business, University College Dublin and Anderson School of Management, University of California); Stuart Gabriel (Anderson School of Management, University of California); Richard Roll (California Institute of Technology) |
| Abstract: | This study evaluates the effectiveness of geographic diversification in reducing housing investment risk. To characterize diversification potential, we estimate spatial correlation and integration among 401 US metropolitan housing markets. The 2000s boom brought a marked uptrend in housing market integration associated with eased residential lending standards and rapid growth in private mortgage securitization. As boom turned to bust, macro factors, including employment and income fundamentals, contributed importantly to the trending up in housing return integration. Portfolio simulations reveal substantially lower diversification potential and higher risk in the wake of increased market integration. |
| Keywords: | integration, housing risk diversification, housing returns |
| JEL: | G10 G11 G12 G14 R12 R21 |
| Date: | 2014–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:201412&r=ban |
| By: | Caiazza, Stefano; Pozzolo, Alberto Franco |
| Abstract: | The consolidation process that characterized the banking industry in the last decades has been widely analyzed, but very few studies have investigated what are the reasons why a number of announced deals were not concluded. We fill this gap in the literature analyzing the characteristics of abandoned M&A operations in a large sample that includes all the major domestic and cross-border deals in the banking sector announced worldwide between 1992 and 2010. The results show that hostile operations, deals of larger size and deals implying swaps of shares are less likely to be concluded. Controlling for size, cross-border operations are more likely to be successfully concluded, contrary to the expectation that the presence of strong cultural barriers and regulations, implicit and explicit, could determine a higher abandonment ratio. Finally, deals announced in countries with stronger supervisory authorities have a higher probability of failure. |
| Keywords: | Bank M&As, Abandoned deals |
| JEL: | G15 G21 G34 |
| Date: | 2014–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:mol:ecsdps:esdp14074&r=ban |