Can mergers in Europe help banks hedge against macroeconomic risk?

Pierre-Guillaume Méon and Laurent Weill ()

Applied Financial Economics, 2005, vol. 15, issue 5, pages 315-326

Abstract: This study 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. It is observed that the loan portfolios of European banks are home-biased. The portfolio approach is applied to explore the risk-return efficiency of the locations of banks' activities. Mergers between pairs of banks are also studied. 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 is also provided.

Date: 2005
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Related works:
Working Paper: Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk (2003)
Working Paper: Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk? (2005)
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