The Impact of M&As on Bank Risk in Spain (1986-2007)
Revista de Estabilidad Financiera, Número 25, Noviembre de 2013
13 Pages Posted: 25 Aug 2017
Date Written: November 20, 2013
There is a paucity of research on the impact of domestic M&As on bank risk profiles. This paper exploits a rich database of Spanish banks during 1986-2010 to study the changes in bank risk profiles immediately before and after domestic M&As. Our results control for potential selection bias and show that, for acquiring banks, size and capitalization are important drivers of risk exposure before and after M&As. We find that target banks that received financial support from the government in the context of M&As showed a statistically significant increase in risk-taking before but not after a deal. Overall, our results indicate that bank size, leverage and government support have not caused banks to engage in additional risk-taking via M&As. However, changes to banks' funding and income mix are linked to higher risk-taking.
Keywords: Banks; Mergers; Spain
JEL Classification: G21; G34
Suggested Citation: Suggested Citation