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'Too Systemically Important To Fail’ in Banking – Evidence from Bank Mergers and Acquisitions

Molyneux, P. and Schaeck, K. and Zhou, T.M. (2014) 'Too Systemically Important To Fail’ in Banking – Evidence from Bank Mergers and Acquisitions. Journal of International Money and Finance, 49 (part B). 258–282. DOI: 10.1016/j.jimonfin.2014.03.006

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Abstract

In this paper, we examine the systemic risk implications of banking institutions that are considered �Too-systemically-important- to-fail� (TSITF). We exploit a sample of bank mergers and acquisitions (M&As) in nine EU economies between 1997 and 2007 to capture safety net subsidy effects and evaluate their ramifications for systemic risk. We find that safety net benefits derived from M&A activity have a significantly positive association with rescue probability, suggesting moral hazard in banking systems. We, however, find no evidence that gaining safety net subsidies leads to TSITF bank�s increased interdependency over peer banks

Item Type: Article
Subjects: Research Publications
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Date Deposited: 09 Dec 2014 16:26
Last Modified: 25 Sep 2015 02:33
ISSN: 0261-5606
URI: http://e.bangor.ac.uk/id/eprint/140
Identification Number: DOI: 10.1016/j.jimonfin.2014.03.006
Publisher: Elsevier
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