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Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk

Author

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  • Pierre-Guillaume Méon
  • Laurent Weill

    (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

Abstract

This paper investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. We observe that the loan portfolios of European banks are home-biased. We apply the portfolio approach to explore the risk-return efficiency of the locations of banks’ activities. We also study mergers between pairs of banks. We provide evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Pierre-Guillaume Méon & Laurent Weill, 2003. "Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk," Working Papers of LaRGE Research Center 2003-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2003-05
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    References listed on IDEAS

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    More about this item

    Keywords

    European integration; risk sharing; regional specialization; portfolio diversification.;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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