Diversification, Size and Risk: the Case of Bank Acquisitions of Nonbank Financial Firms

Abstract

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Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries

“…In contrast, Vallascas and Hagendorff (2011) show that low-risk European banks diversifying into nonbanking activities experience a marked increase in default risk. Casu et al (2016) find that bank combinations with securities firms yield higher risks than combinations with insurance companies, yet provide evidence that size may be responsible, as opposed to diversification per se. Similarly, Weiß et al (2014) find an increase in systemic risk following M&A activity that is not associated with income diversification, but related to managerial hubris and the existence of deposit insurance guarantees.…”

“…We refer the interested reader toCasu et al (2016) for a more detailed discussion of the bank diversification literature.…”

The Stock Market Reaction to Mergers and Acquisitions: Evidence from the Banking Industry

“…However, the direction of the effect is not always the same, and 83% of the significant coefficients are negative. From the theoretical and empirical point of view, the impact of M&A announcements on stock volatility depends on the interaction between the positive and negative effects of the deal (Amihud et al, 2002;Bozos et al, 2013;Casu et al, 2016). On the one hand, the synergy and profits that the deal may generate create uncertainty about the future of the company, which may increase stock volatility, but, on the other hand, the new information provided by announcement of the deal may cause investors' opinions about the price of the acquirer's stock to converge, which reduces volatility (Elyasiani et al, 2016).…”

“…However, an increase in volatility could result either because of the unclear purpose of the deal or because of the rise in the concentration of market power (Amihud et al, 2002;Bozos et al, 2013;Casu, Dontis-Charitos, Staikouras, & Williams, 2016;Elyasiani et al, 2016). Although the literature focuses on the effects of the M&A announcements on shareholder wealth for acquirers, targets, and rivals, the impact on volatility has been explored less.…”

Essays in cash holdings

“…Ang et al, 2006;Xu & Malkiel, 2003;Campbell et al, 2001), leverage (Gerlach et al, 2015;Mishra et al, 2012), credit rating (Y.-M. Lin & Shen, 2015;Abad & Robles, 2014), rm age (C.-W. Huang et al, 2014), CEO compensation (Balafas & Florackis, 2014), nancial reporting quality (Rajgopal & Venkatachalam, 2011), cash ows (Babenko et al, 2015;D. Huang & Wang, 2009), diversication (Casu et al, 2015;Roussanov, 2010), human capital (Eiling, 2013), product market competition (Irvine & Ponti, 2008), corporate sustainability (Mishra et al, 2012; K.-W. Lee & Lee, 2009), consumer voice (Luo, 2007), innovation (Mazzucato & Tancioni, 2008), stock valuation (Pastor & Pietro, 2003), ownership (Xu & Malkiel, 2003), and investor base (Chichernea et al, 2015).…”