THE EFFECT OF MERGERS AND ACQUISITIONS ON BANK RISK-TAKING

Lu Wang ()
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Lu Wang: Department of Economics, Finance and International Business, Fairleigh Dickinson University, Vancouver Campus, 842 Cambie Street, Vancouver, BC V6B 2P6, Canada

Journal of Financial Management, Markets and Institutions (JFMMI), 2024, vol. 12, issue 01, 1-29

Abstract: This paper evaluates how the risks associated with mergers and acquisitions (M&As) affect Bank Holding Companies’ (BHCs) levels of insolvency risk. Bank insolvency is hypothesized to be affected by M&As directly and indirectly through banks’ market risk, geographical diversification, and activity diversification. The relationship between bank insolvency, diversification, and market risk is estimated as a system using the Generalized Method of Moments (GMM). The key finding is that M&As erode banks’ insolvency, both directly and indirectly through the effects associated with their geographical diversification.

Keywords: Bank; insolvency risk; merger; acquisition (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2282717X2350007X

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