Systemic risk and bank consolidation: International evidence

Gregor N.F. Weiß, Sascha Neumann and Denefa Bostandzic

Journal of Banking & Finance, 2014, vol. 40, issue C, 165-181

Abstract: This paper analyzes the systemic risk effects of bank mergers to test the “concentration-fragility” hypothesis. We use the marginal expected shortfall as well as the lower tail dependence between a bank’s stock returns and a relevant bank sector index to capture the merger-related change in an acquirer’s contribution to systemic risk. In our empirical analysis of a dataset of international domestic and cross-border mergers, we find clear evidence for a significant increase in the merging banks’, the combined banks’ as well as their competitors’ contribution to systemic risk following mergers, thus confirming the “concentration-fragility” hypothesis.

Keywords: M&A; Banks; Consolidation; Systemic risk; Lower tail dependence; Marginal expected shortfall (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 G32 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:40:y:2014:i:c:p:165-181

DOI: 10.1016/j.jbankfin.2013.11.032

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