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The Impact of Bank Mergers on Liquidity Creation


Elisabeta Pana


Illinois Wesleyan University

J. Tim Query


New Mexico State University

Jin Park


Indiana State University
July 1, 2010

Journal of Risk Management in Financial Institutions, Forthcoming

Abstract:     
Using 189 commercial bank mergers between 1997 and 2004, we document a positive impact of the merger activity on bank liquidity creation. Consistent with the deposit insurance hypothesis, we find that banks with higher levels of deposit insurance create higher levels of liquidity around mergers. Furthermore, we document that the level of equity capital explains the change in liquidity creation around mergers for the sample of large acquirers. We show that for the sample of small acquirers there is a negative relationship between the level of economic growth and changes in liquidity creation around mergers.

Keywords: Capital Structure, Liquidity Creation, Regulation, and Banking

JEL Classification: G21, G28, G32

working papers series


Date posted: October 17, 2009 ; Last revised: September 8, 2010

Suggested Citation

Pana, Elisabeta, Query, J. Tim and Park, Jin , The Impact of Bank Mergers on Liquidity Creation (July 1, 2010). Journal of Risk Management in Financial Institutions, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1488604

Contact Information

Elisabeta Pana (Contact Author)
Illinois Wesleyan University ( email )
P.O. Box 2900
Bloomington, IL 61702-2900
United States
Jeffrey T. Query
New Mexico State University ( email )
Las Cruces, NM 88003
United States
Jin Park
Indiana State University ( email )
800 Sycamore Street
Terre Haute, IN 47809
United States
812=237-9036 (Phone)
Feedback to SSRN (Beta)


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