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Bank management in bank decline: Bank mergers as a recovery recipe?

Author

Listed:
  • Anders Kjellman

    (Novia University of Applied Science, Vaasa, Finland)

  • Risto Tainio

    (Aalto University, Helsinki, Finland.)

  • Taisto Kangas

    (Aalto University, Helsinki, Finland.)

Abstract

The aim of this article is to present a model concerning bank management during the period of decline. Our focus is on bank mergers as a way out in from a crises situation. Generally, the explicit factor behind bank decline usually relates an economic downturn. However, the implicit, triggering factor behind bank decline relates to bank management. The available options for crisis bank management beside mergers are to cut costs, to increase income, to get more own capital, to manipulate bookkeeping data, to sell the bank, to buy banks or to declare failure. Based on 309 bank mergers during 1990 to 2013, we found that bank managers in many cases gradually lost their confidence concerning their capability of successfully running their banks, therefore choosing to merge.

Suggested Citation

  • Anders Kjellman & Risto Tainio & Taisto Kangas, 2014. "Bank management in bank decline: Bank mergers as a recovery recipe?," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(6), pages 26-36, December.
    • Handle: RePEc:lrc:lareco:v:2:y:2014:i:6:p:26-36
    DOI: http://dx.doi.org/10.18533/jefs.v2i06.149
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    Cited by:

    1. Papadimitri, Panagiota & Staikouras, Panagiotis & Travlos, Nickolaos G. & Tsoumas, Chris, 2019. "Punished banks' acquisitions: Evidence from the U.S. banking industry," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 744-764.

    More about this item

    Keywords

    Banking crisis; Bank management; Decline model; Merger.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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