The Impact of Bank Mergers on Liquidity Creation

Journal of Risk Management in Financial Institutions, Forthcoming

Posted: 17 Oct 2009 Last revised: 8 Sep 2010

See all articles by Elisabeta Pana

Elisabeta Pana

Central Connecticut State University

J. Tim Query

New Mexico State University

Jin Park

Indiana State University

Date Written: July 1, 2010

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

Suggested Citation

Pana, Elisabeta and Query, Jeffrey T. 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: https://ssrn.com/abstract=1488604

Elisabeta Pana (Contact Author)

Central Connecticut State University ( email )

1615 Stanley Street
New Britain, CT 06050
United States

Jeffrey T. Query

New Mexico State University ( email )

College of Business
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)

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