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Asset Restructuring Strategies in Bank Acquisitions: Evidence from the Italian Banking Industry

Pietro Alessandrini (), Giorgio Calcagnini () and Alberto Zazzaro ()

No 264, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: One of the most lively debated effects of banking acquisitions is the change in lending and asset allocation of the target bank in favour of transactional activities, at the expense of small and informational opaque borrowers. These changes may be the result of two distinct restructuring strategies of the asset portfolio of the bidder bank. An asset cleaning strategy (ACS), in which the acquiring bank makes a clean sweep of all the negative net present value activities in the portfolio of the acquired bank, and an asset portfolio strategy (APS), in which the acquiring bank permanently changes the portfolio allocation of the acquired bank. In this paper we focus on Italian bank acquisitions and test which asset restructuring strategy was predominantly pursued over the period 1997-2003. Moreover, we estimate both a model for the whole Italian banking industry and a model for the acquired banks located in economic backward Southern regions. At the national level we find evidence of a primacy of ACSs over APSs. When we concentrate on bank acquisitions that occurred in the Mezzogiorno (Italy’s Southern regions), evidence seems to reverse, i.e. APSs dominate over ACSs.

Keywords: asset restructuring strategies; bank acquisitions; small business lending (search for similar items in EconPapers)
JEL-codes: G21 L22 (search for similar items in EconPapers)
Pages: 37
Date: 2006-06
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-com, nep-fin and nep-fmk
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