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Can mergers in Europe help banks hedge against macroeconomic risk?

Pierre-Guillaume Méon () and Laurent Weill ()

No in, DULBEA Working Papers from ULB -- Universite Libre de Bruxelles

Abstract: This paper investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. We observe that the loan portfolios of European banks are home-biased. We apply the portfolio approach to explore the risk-return efficiency of the locations of banks’ activities. We also study mergers between pairs of banks. We provide evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers.

Keywords: bank mergers; risk diversification; European integration (search for similar items in EconPapers)
JEL-codes: F15 G11 G21 G34 (search for similar items in EconPapers)
Pages: 27 p.
Date: 2005-02
New Economics Papers: this item is included in nep-eec, nep-fin, nep-fmk and nep-rmg
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Published by: DULBEA - Université libre de Bruxelles, Bruxelles

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Related works:
Journal Article: Can mergers in Europe help banks hedge against macroeconomic risk? (2005) Downloads
Working Paper: Can mergers in Europe help banks hedge against macroeconomic risk? (2005)
Working Paper: Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk (2003) Downloads
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