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Size, Risk, and Governance in European Banking - Oxford Scholarship Online
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Size, Risk, and Governance in European Banking

Jens Hagendorff, Kevin Keasey, and Francesco Vallascas

Abstract

we employ the Merton distance to default model to show that, on average, bank mergers are risk neutral. However, for relatively safe banks, mergers generate a significant increase in default risk. This result is particularly pronounced for cross-border and activity-diversifying deals as well as for deals completed under weak bank regulatory regimes. Also, large deals, which pose organizational and procedural hurdles, experience a merger-related increase in default risk. Our results cast doubt on the ability of bank merger activity to exert a risk-reducing and stabilizing effect on the European ... More

Keywords: bank default risk, consolidation, regulatory regimes

Bibliographic Information

Print publication date: 2013 Print ISBN-13: 9780199694891
Published to Oxford Scholarship Online: January 2014 DOI:10.1093/acprof:oso/9780199694891.001.0001

Authors

Affiliations are at time of print publication.

Jens Hagendorff, author
Martin Currie Professor in Finance and Investment, the University of Edinburgh

Kevin Keasey, author
Professor of Accounting and Finance, Leeds University Business School

Francesco Vallascas, author
Associate Professor of Banking and Finance, Leeds University Business School