Why are some banks recapitalized and others taken over?

Elena Beccalli and Pascal Frantz

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This study investigates the likelihood of takeovers or recapitalizations for EU listed banks before and during the financial, using both static and sequential multinomial logistic models. Takeovers and recapitalizations are potential alternatives used to shore up financial institutions. We find that takeovers occur when the bank has low net interest margins. Instead, private recapitalizations occur for banks with lower equity, higher net interest margins, and positive growth at the bank level. Public recapitalizations occur for larger, less liquid banks with positive prospects that operate in bigger banking systems. Both types of recapitalizations occur in countries with lower growth. The determinants for takeovers and recapitalization differ between the pre-crisis and crisis periods. Overall, a need for corporate control exists when traditional banking suffers lower performance, whereas the search for stability explains recapitalizations.

Keywords: banking; recapitalizations; takeovers; EU (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Date: 2016-11-01
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published in Journal of International Financial Markets, Institutions and Money, 1, November, 2016, 45, pp. 79-95. ISSN: 1042-4431

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:67305

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