 Equities of scope as merger incentives under capital regulation: narrow versus synergy banking valuationShi Chen, Jeng-Yan Tsai and Rosemary Jou Applied Economics, 2016, vol. 48, issue 37, 3508-3525 Abstract: The call options theory of corporate security valuation is applied to narrow-banking contingent claims of one bank, while the cap options theory is applied to synergy-banking contingent claims of another bank. This article investigates efficiency gains specified as equities of scope associated with the likelihood of the two banks involved in merger under capital regulation. We find that merger incentives are encouraged when the narrowing banking is conducted by the consolidated bank, whereas discouraged when the synergy banking is conducted. Raising bank capital requirement leads to an increased interest margin of the consolidated bank with the narrow banking valuation; however, to a decreased margin of the consolidated bank with the synergy banking valuation. An increase in the capital regulation reduces the merger incentives in the narrow banking valuation whereas increases the merger disincentive in the synergy banking valuation. These findings are consistent with the organizational theory that predicts a comparative advantage of narrow banking proposals in bank mergers. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:48:y:2016:i:37:p:3508-3525 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2016.1139683 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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