 Are bank mergers procyclical or countercyclical? Theory and evidence from TaiwanWen-Chung Guo and Chih-Ching Yang Applied Financial Economics, 2013, vol. 23, issue 1, 1-14 Abstract: This work develops a theory of countercyclical bank mergers and finds supported empirical evidence in Taiwan. Procyclical (countercyclical) mergers tend to involve higher (lower) measures of merger activities during economic booms than downturns. Several previous studies suggest that bank mergers are procyclical in developed countries, possibly driven by the higher capital liquidity that accompanies an economic expansion. Alternatively, this work emphasizes the role of economic situation and the government in bank mergers. Our results suggest that the depressed industrial situation, which leads to severe competitive market and impoverished revenue basis, drives banks to increase their market share for reducing competition through merger with the merger cost as low as possible by utilizing government's offering and the beneficial condition of stock market. Merger activities may be explained by the motivation of generating higher profit and able to survive, whereas the banks with insufficient competitiveness are more likely to suffer serious loss and thus forced to be merged. Date: 2013 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:23:y:2013:i:1:p:1-14 Ordering information: This journal article can be ordered from DOI: 10.1080/09603107.2012.699183 Access Statistics for this article Applied Financial Economics is currently edited by Anita Phillips More articles in Applied Financial Economics from Taylor & Francis Journals |
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