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The Sale of Failed Banks: The Characteristics of Acquirersas Well as of the Acquired -Matter

Author

Listed:
  • Pejman Abedifar

    (Tehran Institute for Advanced Studies - Khatam University)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Lawrence J White

    (Stern School of Business, New York University, New York, NY 10012-1126, USA)

Abstract

This paper studies the pricing of assets and core deposits of insolvent banks that are sold under the purchase and assumption resolution method of the Federal Deposit Insurance Corporation (FDIC). We analyze 620 acquisitions of solvent and insolvent U.S. banks between 2007:Q1 and 2016:Q3 and find that acquirers pay higher prices for insolvent banks with more branches. Our findings hence show that the premium paid by acquirers is not only embedded in failed banks' core deposits but also in the size of their branch networks. Moreover, the core deposits of failed banks are better valued by more capitalized bidders. We also compare the financial strength of acquirers of failed banks with that of acquirers of healthy banks in non-assisted takeovers. The results show that the acquirers in the FDICassisted acquisitions are less efficient and have higher non-performing loans than the acquirers in non-assisted acquisitions.

Suggested Citation

  • Pejman Abedifar & Amine Tarazi & Lawrence J White, 2021. "The Sale of Failed Banks: The Characteristics of Acquirersas Well as of the Acquired -Matter," Working Papers hal-03477222, HAL.
    • Handle: RePEc:hal:wpaper:hal-03477222
    Note: View the original document on HAL open archive server: https://hal.science/hal-03477222
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    References listed on IDEAS

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    Keywords

    Bank failures; Resolution; FDIC;
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