Auctions of failed banks: an analysis of losing bidders

Tim M. Zhou ()
Additional contact information
Tim M. Zhou: Bay Campus, Swansea University

Review of Quantitative Finance and Accounting, 2023, vol. 61, issue 1, No 5, 155-176

Abstract: Abstract Between 2007 and 2013, the Federal Deposit Insurance Corporation (FDIC) used purchase and assumption (P&A) as a resolution method to auction 492 failed institutions to healthy banks. While existing studies reveal positive value effects on winning bidders of these auctions, this study finds that losing bidders experience negative abnormal stock returns. Furthermore, the losing bidders’ stockholders react negatively to a worsening market condition and an increased probability of failure. The returns, nevertheless, are related to the market power gains and distorted competitive condition post-auction. These results raise concerns that this type of intervention potentially gives rise to anticompetitive behavior among participating banks of FDIC auctions.

Keywords: FDIC; Banks; Resolution; Auction (search for similar items in EconPapers)
JEL-codes: D44 G14 G21 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11156-023-01146-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
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:kap:rqfnac:v:61:y:2023:i:1:d:10.1007_s11156-023-01146-3

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-023-01146-3

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().