Selling Failed Banks

João Granja, Gregor Matvos and Amit Seru

No 20410, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the recent episode of bank failures and provide simple facts to better understand who acquires failed banks and which forces drive the losses that the FDIC realizes from these sales. We document three distinct forces related to the allocation of failed banks to potential acquirers. First, a geographically proximate bank is significantly more likely to acquire a failed bank: only 15% of acquirers do not have branches within the state. Sales are more local in regions with more soft information. Second, a failed bank is more likely to be purchased by a bank that has a similar loan portfolio and that offers similar services, highlighting the role of failed banks' asset specificity. Third, low capitalization of potential acquirers decreases their ability to acquire a failed bank and potentially distorts failed bank allocation. The results are robust to restricting the data to actual bidders, confirming that they are not driven by auction eligibility criteria imposed by the FDIC. We relate these forces to FDIC losses from failed bank sales. We organize these facts using the fire sales framework of Shleifer and Vishny (1992). Our findings speak to recent policies that are predicated on the idea that a bank's ability to lend is embodied in its collection of assets and employees and cannot be easily replaced or sold.

JEL-codes: E65 G18 G21 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-ban, nep-fmk and nep-mac
Note: CF IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Published as JOÃO GRANJA & GREGOR MATVOS & AMIT SERU, 2017. "Selling Failed Banks," The Journal of Finance, vol 72(4), pages 1723-1784.

Downloads: (external link)
http://www.nber.org/papers/w20410.pdf (application/pdf)

Related works:
Journal Article: Selling Failed Banks (2017)
Working Paper: Selling Failed Banks (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:20410

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w20410

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().