The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition
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.
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Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers
Publication Date: 2019-07-05
Note: this is the second revision of a paper originally published in June of 2016 and revised in July of 2017.