The Impacts of Stricter Merger Legislation on Bank Mergers and Acquisitions: Too-Big-To-Fail and Competition

54 Pages Posted: 3 Mar 2020

See all articles by Elena Carletti

Elena Carletti

Bocconi University

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Jan-Peter Siedlarek

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: February 2020

Abstract

The effect of regulations on the banking sector is a key question for financial intermediation. This paper provides evidence that merger control regulation, although not directly targeted at the banking sector, has substantial economic effects on bank mergers. Based on an extensive sample of European countries, we show that target announcement premia increased by up to 16 percentage points for mergers involving control shifts after changes in merger legislation, consistent with a market expectation of increased profitability. These effects go hand-in-hand with a reduction in the propensity for mergers to create banks that are too-big-to-fail in their country.

Keywords: Antitrust, banks, Merger Control, mergers and acquisitions, regulation

JEL Classification: G21, G34, K21, L40

Suggested Citation

Carletti, Elena and Ongena, Steven R. G. and Siedlarek, Jan-Peter and Spagnolo, Giancarlo, The Impacts of Stricter Merger Legislation on Bank Mergers and Acquisitions: Too-Big-To-Fail and Competition (February 2020). CEPR Discussion Paper No. DP14449, Available at SSRN: https://ssrn.com/abstract=3547382

Elena Carletti (Contact Author)

Bocconi University ( email )

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jan-Peter Siedlarek

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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