Spillover Effects of Cross-Border Bank Acquisitions on Systemic Risk

59 Pages Posted: 25 Jun 2021

See all articles by John Sedunov

John Sedunov

Villanova University - Department of Finance

Alvaro G. Taboada

Mississippi State University

Date Written: June 15, 2021

Abstract

We examine the spillover and direct effects of cross-border bank M&As on the systemic risk of banks in the target’s country. We document that higher cross-border bank M&A activity is associated with higher systemic risk for peer banks, while target banks exhibit a decrease in systemic risk post-merger. The effect is stronger for deals involving large acquirers from developed countries and from countries with weaker regulatory quality than the target’s country. Our data suggest that the channels for these effects are reductions in peer banks’ market value of equity and income diversity and an increase in market value of equity for target banks post-merger relative to the control group. Our findings show destabilizing effects of cross-border bank M&As that stem from improvements in the quality of the target banks that exert pressure on peer banks.

Keywords: Banking, Cross-border, Mergers and Acquisitions, Systemic Risk

JEL Classification: G21, G34, F30

Suggested Citation

Sedunov, John and Taboada, Alvaro G., Spillover Effects of Cross-Border Bank Acquisitions on Systemic Risk (June 15, 2021). Available at SSRN: https://ssrn.com/abstract=3867577 or http://dx.doi.org/10.2139/ssrn.3867577

John Sedunov

Villanova University - Department of Finance ( email )

800 Lancaster Ave.
Villanova, PA 19085
United States
610-519-4374 (Phone)

HOME PAGE: http://homepage.villanova.edu/john.sedunov/

Alvaro G. Taboada (Contact Author)

Mississippi State University ( email )

310-H McCool Hall
PO Box 9580
Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

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