Accounting for Distress in Bank Mergers

Deutsche Bundesbank Discussion Paper No. 2

EFA 2006 Zurich Meetings

48 Pages Posted: 3 Oct 2005 Last revised: 19 Oct 2011

See all articles by Michael Koetter

Michael Koetter

Halle Institute for Economic Research

Jaap W.B. Bos

Maastricht University

Frank Heid

Deutsche Bundesbank

James W. Kolari

Texas A&M University - Department of Finance

Clemens J.M. Kool

Utrecht University - School of Economics

Daniel Porath

University of Applied Sciences Mainz

Multiple version iconThere are 3 versions of this paper

Date Written: September 2005

Abstract

The inability of most bank merger studies to control for hidden bailouts may lead to biased results. In this study, we employ a unique data set of approximately 1,000 mergers to analyze the determinants of bank mergers. We use data on the regulatory intervention history to distinguish between distressed and non-distressed mergers. We find that, among merging banks, distressed banks had the worst profiles and acquirers perform somewhat better than targets. However, both distressed and non-distressed mergers have worse CAMEL profiles than our control group. In fact, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention.

Keywords: Mergers, bailout, X-efficiency, multinomial logit

JEL Classification: G21, G34, G14

Suggested Citation

Koetter, Michael and Bos, Jaap W.B. and Heid, Frank and Kolari, James W. and Kool, Clemens J.M. and Porath, Daniel, Accounting for Distress in Bank Mergers (September 2005). Deutsche Bundesbank Discussion Paper No. 2; EFA 2006 Zurich Meetings. Available at SSRN: https://ssrn.com/abstract=811525 or http://dx.doi.org/10.2139/ssrn.811525

Michael Koetter (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

HOME PAGE: http://www.iwh-halle.de/en/about-the-iwh/people/detail/michael-koetter/

Jaap W.B. Bos

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Frank Heid

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

James W. Kolari

Texas A&M University - Department of Finance ( email )

MS-4218
Department of Finance
College Station, TX TX 77843-4218
United States
979-845-4803 (Phone)
979-845-3884 (Fax)

Clemens J.M. Kool

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Daniel Porath

University of Applied Sciences Mainz ( email )

An der Bruchspitze 50
Mainz 55122
Germany

HOME PAGE: http://www.fh-mainz.de/index.php?id=5726&lastArticle=4692&cHash=b12d1fc2e8#4692

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