Determining an Optimal Capital Standard for the Banking Industry

Santomero, Anthony M.; Watson, Ronald D.

doi:10.2307/2326528

Cited by 27 publications

(18 citation statements)

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“…2 The regulatory intention is clearly presented in the Treasury Report (February 1991) and in Greenspan (199la). See also Santomero and Watson (1977), Wall (1989) and Gorton and Santomero (1990). 3 The value of assets acquired in bank mergers and acquisition increased by more than twelve times between 1980 and 1989, from $9,330 million to $121,000 million (see FDIC annual reports).…”

Section: Notesmentioning

confidence: 99%

Capital Adequacy, Bank Mergers, and the Medium of Payment

Grullon

Michaely

Swary

1997

Business Fin & Account

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We examine how banks' capital requirements affect the way bank mergers are financed, as well as the stock-market reaction to the merger announcement. We find that the capital position of the acquirer is one of the two factors most strongly influencing the choice of financing method; the other is the relative size of the merging banks. The smaller the acquirer in relation to the target bank and the higher the acquirer's capital adequacy ratio, the more likely it is that the acquisition will be financed by a stock swap. The capital requirements also affect the market reaction, through their effect on the financing method choice. The value of the acquirer's equity decreases more at the time of the merger announcement if the method of payment is stock. Like prior studies, we find that the abnormal return on the target banks' stock is positive. Copyright Blackwell Publishers Ltd 1997.

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Section: Notesmentioning

confidence: 99%

Capital Adequacy, Bank Mergers, and the Medium of Payment

Grullon

Michaely

Swary

1997

Business Fin & Account

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“…Concerns about these social costs lead regulators to require bank capital ratios. However, capital regulation involves a tradeoff between the marginal social benefit of reducing the risk of the negative externalities from bank failures and the marginal social cost of diminishing the quantity of financial intermediation (Gorton and Winton;Santomero and Watson, 1977).…”

Section: A Theoretical Perspective On Bank Capital Regulationmentioning

confidence: 99%

Capital Regulation and Italian Banking System: Theory and Empirical Evidence

Scannella¹

2012

IJEF

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This paper aims to investigate the role of capital for banking institutions and provide an empirical analysis on large Italian banks' capital adequacy. The paper is organized as follows. The first section introduces to the issue of the paper. The second section explains why the capital is important in the economics of banking firm. The paper reviews the theoretical literature on bank capital regulation. Empirical results on large Italian banks are reported on the third section. The final section contains summary and concluding comments.

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“…In addition, Saunders et al (1990) specifically state that stock return variance represents a superior risk measure to beta. 17 See Pringle (1974), Santomero and Watson (1977), Taggart and Greenbaum (1978), Buser, Chen, and Kane (1981), Marcus (1983), and Houston and James (1995). 18 We discuss results using variants of our capital ratio measure later in the paper.…”

Section: Control Variablesmentioning

confidence: 99%