The Safety and Soundness Effects of Bank M&A in the EU: Does Prudential Regulation Have Any Impact?

29 Pages Posted: 2 Jun 2015

See all articles by Jens Hagendorff

Jens Hagendorff

University of Edinburgh - Business School

Maria Nieto

Banco de España

Date Written: June 2015

Abstract

This paper studies the impact of European bank mergers on changes in key safety and soundness measures of both acquirers and targets. We find that acquirers in cross‐border deals tend to perform better when their home country prudential supervisors and deposit insurance funding systems are stricter than that of the target. For target banks, we find that stronger supervision and tougher deposit insurance funding regimes result in positive post merger changes in liquidity and performance. Overall, while bank mergers have undermined bank safety and soundness in some cases, our evidence indicates that strong regulation and supervision can partly ameliorate this.

Keywords: banks, mergers, Europe

Suggested Citation

Hagendorff, Jens and Nieto, Maria J., The Safety and Soundness Effects of Bank M&A in the EU: Does Prudential Regulation Have Any Impact? (June 2015). European Financial Management, Vol. 21, Issue 3, pp. 462-490, 2015. Available at SSRN: https://ssrn.com/abstract=2613173 or http://dx.doi.org/10.1111/j.1468-036X.2013.12022.x

Jens Hagendorff (Contact Author)

University of Edinburgh - Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
UNITED KINGDOM

Maria J. Nieto

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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