‘Too systemically important to fail’ in banking – evidence from bank mergers and acquisitions

Molyneux, Philip and Schaeck, Klaus and Zhou, Tim Mi (2014) ‘Too systemically important to fail’ in banking – evidence from bank mergers and acquisitions. Journal of International Money and Finance, 49 (Part B). pp. 258-282. ISSN 0261-5606

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Abstract

In this paper, we examine the systemic risk implications of banking institutions that are considered ‘Too-systemically-important-to-fail’ (TSITF). We exploit a sample of bank mergers and acquisitions (M&As) in nine EU economies between 1997 and 2007 to capture safety net subsidy effects and evaluate their ramifications for systemic risk. We find that safety net benefits derived from M&A activity have a significantly positive association with rescue probability, suggesting moral hazard in banking systems. We, however, find no evidence that gaining safety net subsidies leads to TSITF bank's increased interdependency over peer banks.

Item Type:
Journal Article
Journal or Publication Title:
Journal of International Money and Finance
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
73592
Deposited By:
Deposited On:
14 Apr 2015 11:38
Refereed?:
Yes
Published?:
Published
Last Modified:
11 Feb 2020 08:30