Mergers in financial services and overlending

David Peón and Manel Antelo
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David Peón: Department of Business, University of A Coruna (Spain)

Cuadernos de Economía - Spanish Journal of Economics and Finance, 2018, vol. 41, issue 116, 167-180

Abstract: In this paper we build a model of banking competition that considers a managerial-overconfidence setup resulting in two main findings. First, a merger between rational banks may change their behaviour in that, in post-merger conditions, they would follow the overconfident bank when they would not have done so pre-merger, thereby amplifying the credit boom. Second, the results overcome the merger paradox, in the sense that the merger would be profitable for participants and thus intrinsically stable.

Keywords: Banking efficiency; Behavioural finance; Mergers; Herding; Merger paradox; Overconfidence (search for similar items in EconPapers)
JEL-codes: D03 E32 G21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cud:journl:v:41:y:2018:i:116:p:167-180

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