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The impact of bank mergers on liquidity creation

Author

Listed:
  • Pana, Elisabeta
  • Park, Jin
  • Query, Tim

Abstract

Using 189 commercial bank mergers between 1997 and 2004, a positive impact of the merger activity on bank liquidity creation is demonstrated. Consistent with the deposit insurance hypothesis, it is found that banks with higher levels of deposit insurance create higher levels of liquidity around mergers. Furthermore, evidence is provided that the level of equity capital explains the change in liquidity creation around mergers for the sample of large acquirers. Also it is shown that for the sample of small acquirers there is a negative relationship between the level of economic growth and changes in liquidity creation around mergers.

Suggested Citation

  • Pana, Elisabeta & Park, Jin & Query, Tim, 2010. "The impact of bank mergers on liquidity creation," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 4(1), pages 74-96, December.
    • Handle: RePEc:aza:rmfi00:y:2010:v:4:i:1:p:74-96
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    Citations

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    Cited by:

    1. Evans, Joshua J. & Haq, Mamiza, 2022. "Does bank capital reduce liquidity creation?," Global Finance Journal, Elsevier, vol. 54(C).
    2. Boubakri, Narjess & Cao, Zhongyu & El Ghoul, Sadok & Guedhami, Omrane & Li, Xinming, 2023. "National culture and bank liquidity creation," Journal of Financial Stability, Elsevier, vol. 64(C).
    3. Gupta, Juhi & Kashiramka, Smita & Ly, Kim Cuong & Pham, Ha, 2023. "The interrelationship between bank capital and liquidity creation: A non-linear perspective from the Asia-Pacific region," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 793-820.
    4. Chen, Ting-Hsuan & Lee, Chien-Chiang & Shen, Chung-Hua, 2022. "Liquidity indicators, early warning signals in banks, and financial crises," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    5. Berger, Allen N. & Li, Xinming & Saheruddin, Herman & Zhao, Daxuan, 2024. "Government guarantees and bank liquidity creation around the world," Journal of Banking & Finance, Elsevier, vol. 158(C).
    6. Rim Ben Abdesslem & Halim Dabbou & Mohamed Imen Gallali, 2023. "The Impact of Market Concentration on Bank Risk-Taking: Evidence from a Panel Threshold Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4170-4194, December.

    More about this item

    Keywords

    capital structure; liquidity creation; regulation; banking; G21; G28; G32;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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