Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - ‘Too systemically important to fail’ in banking – evidence from bank mergers and acquisitions
AU - Molyneux, Philip
AU - Schaeck, Klaus
AU - Zhou, Tim Mi
PY - 2014/12/1
Y1 - 2014/12/1
N2 - 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.
AB - 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.
KW - Systemic importance
KW - Systemic risk
KW - Mergers and acquisitions
KW - Banking
U2 - 10.1016/j.jimonfin.2014.03.006
DO - 10.1016/j.jimonfin.2014.03.006
M3 - Journal article
VL - 49
SP - 258
EP - 282
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
SN - 0261-5606
IS - Part B
ER -