SoleCRISTransition linkFrontpageTransition linkInstructionsTransition linkLogin Bank of Finland

A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
      
This is the view page of publication. On this page you can view basic information of publication or go back on previous page using back-action on the bottom of the page. If you want to move to edit the information of publication, use the actions on the bottom of the page or continue using the system from menu.


Cross-Border Bank M&As and Risk: Evidence from the Bond Market, Journal of Money, Credit and Banking 4 (June) (2010). Hasan, Iftekhar; Choi, Sungho; Francis, Bill B.


Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Hasan, Iftekhar; Choi, Sungho; Francis, Bill B. 
Number of authors
Status Published
Year of publication 2010 
Date 20.06.2010 
Name of article Cross-Border Bank M&As and Risk: Evidence from the Bond Market 
Name of journal Journal of Money, Credit and Banking
Volume of issue 42 
Number of issue 4 (June) 
Pages 615-45 
Abstract The impact of cross‐border bank M&As on bank risk remains an open question. Though geographically diversifying bank M&As have the potential to reduce the risk of bank insolvency, they also have the potential to increase that risk due to the increase in risk‐taking incentives by bank managers and stockholders following these transactions. This paper empirically investigates whether cross‐border bank M&As increase or decrease the risk of acquiring banks as captured by changes in acquirers' yield spreads. This paper also investigates how differences in the institutional environments between bidder and target countries affect changes in yield spreads following M&A announcements. The study finds that bondholders, in general, perceive cross‐border bank M&As as risk‐increasing activities, unlike domestic bank mergers. Specifically, on average, yield spreads increase by 4.13 basis points following the announcement of cross‐border M&As. This study also finds that these yield spreads are significantly affected by the differences in investor‐protection and deposit insurance environments between the transacting countries. However, the study does not find that the regulatory and supervisory environment in the home countries of the transacting parties significantly affects the changes in yield spreads. The overall evidence suggests that regulators should judge the relative environment in both the home and the host countries in evaluating the associated risks of an active multinational financial institution and in setting the sufficiency of the banks' reserve positions.
Free text descriptor in English bank risk, cross‐border, M&A, yield spreads 
JEL-codes F23; G14; G21; G34 
ISSN / e-ISSN 0022-2879 
auki Internet addresses
Additional information First published: 20 May 2010
Notes BoF DP 4/2010 


Related publications