The Sale of Failed Banks: The Characteristics of Acquirersas Well as of the Acquired -Matter

Pejman Abedifar, Amine Tarazi and Lawrence White
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Pejman Abedifar: Tehran Institute for Advanced Studies - Khatam University
Lawrence White: Stern School of Business, New York University, New York, NY 10012-1126, USA

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Abstract: This paper studies the pricing of assets and core deposits of insolvent banks that are sold under the purchase and assumption resolution method of the Federal Deposit Insurance Corporation (FDIC). We analyze 620 acquisitions of solvent and insolvent U.S. banks between 2007:Q1 and 2016:Q3 and find that acquirers pay higher prices for insolvent banks with more branches. Our findings hence show that the premium paid by acquirers is not only embedded in failed banks' core deposits but also in the size of their branch networks. Moreover, the core deposits of failed banks are better valued by more capitalized bidders. We also compare the financial strength of acquirers of failed banks with that of acquirers of healthy banks in non-assisted takeovers. The results show that the acquirers in the FDICassisted acquisitions are less efficient and have higher non-performing loans than the acquirers in non-assisted acquisitions.

Keywords: Bank failures; Resolution; FDIC (search for similar items in EconPapers)
Date: 2021-12-13
New Economics Papers: this item is included in nep-ban
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Working Paper: The Sale of Failed Banks: The Characteristics of Acquirers -as Well as of the Acquired -Matter (2020)
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