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The safety and soundness effects of bank M&A in the EU

Author

Listed:
  • Jens Hagendorff
  • Maria J. Nieto
  • Larry D. Wall

Abstract

This paper studies the impact of European bank mergers and acquisitions on changes in key safety and soundness measures of both acquirers and targets. We find that capitalization, profitability, and liquidity show signs of statistically and economically significant mean reversion for acquirers. Also, acquirers in cross-border deals tended to perform better when their home country prudential supervisors and deposit insurance funding systems were stricter than the target's. For target banks, the most consistent findings from the cross-sectional regressions are that stronger supervision and tougher deposit insurance funding regimes tend to result in positive postmerger changes in liquidity and performance.

Suggested Citation

  • Jens Hagendorff & Maria J. Nieto & Larry D. Wall, 2012. "The safety and soundness effects of bank M&A in the EU," FRB Atlanta Working Paper 2012-13, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2012-13
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    File URL: http://www.frbatlanta.org/documents/pubs/wp/wp1213.pdf
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    References listed on IDEAS

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    2. Molyneux, Philip & Schaeck, Klaus & Zhou, Tim Mi, 2014. "‘Too systemically important to fail’ in banking – Evidence from bank mergers and acquisitions," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 258-282.

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