Dinger, V., Schmidt, C. and Theissen, E. (2024) The real effects of distressed bank mergers. Journal of Corporate Finance, 89. 102674. ISSN 0929-1199
Abstract
We show that distressed bank mergers that are a widely used instrument for bank resolution have the potential to generate adverse real economic effects. We analyze distressed mergers of German savings banks and show that they represent exogenous shocks to the (initially non-distressed) acquiring bank. In the years after a distressed merger: (i) the performance of the acquiring savings bank deteriorates; (ii) the shock is transmitted to firms in the acquirer’s region which cut back their investments and reduce employment and (iii) the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading to reductions in investment and employment growth. To support a causal interpretation of our results we perform several tests that confirm that local economic dynamics is affected by the shock to the acquiring bank and not by real economic contagion.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors. This is an open access article under the terms of the Creative Commons Attribution License (CC-BY-NC 4.0). |
Keywords: | Bank distress, Merger, Growth, Real effects |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 23 Sep 2024 09:29 |
Last Modified: | 18 Feb 2025 14:46 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jcorpfin.2024.102674 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:217469 |