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The Effect Of Mergers And Acquisitions On Bank Risk-Taking

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  • LU WANG

    (Department of Economics, Finance and International Business, Fairleigh Dickinson University, Vancouver Campus, 842 Cambie Street, Vancouver, BC V6B 2P6, Canada)

Abstract

This paper evaluates how the risks associated with mergers and acquisitions (M&As) affect Bank Holding Companies’ (BHCs) levels of insolvency risk. Bank insolvency is hypothesized to be affected by M&As directly and indirectly through banks’ market risk, geographical diversification, and activity diversification. The relationship between bank insolvency, diversification, and market risk is estimated as a system using the Generalized Method of Moments (GMM). The key finding is that M&As erode banks’ insolvency, both directly and indirectly through the effects associated with their geographical diversification.

Suggested Citation

  • Lu Wang, 2024. "The Effect Of Mergers And Acquisitions On Bank Risk-Taking," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-29, June.
    • Handle: RePEc:wsi:jfmmix:v:12:y:2024:i:01:n:s2282717x2350007x
    DOI: 10.1142/S2282717X2350007X
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    More about this item

    Keywords

    Bank; insolvency risk; merger; acquisition;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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