Gains in Bank Mergers: Evidence from the Bond Markets

Penas, Marı́a Fabiana; Ünal, Haluk

doi:10.2139/ssrn.352700

Cited by 83 publications

(96 citation statements)

References 28 publications

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“…If so, we would expect higher spreads for the banks revealed as not too big to fail. This interpretation contrasts with Black et al (1997), who argue that the TBTF event weakened market discipline for BHCs generally, even those smaller than the 11 actually named as TBTF, 20 but is consistent with Penas and Unal (2004), who document the value of being perceived as TBTF.…”

mentioning

confidence: 65%

“…One obvious candidate is to identify potential TBTF issues by size rather than by the original 1984 list. Whether "big" is defined as assets over $100 billion, over $85 billion (roughly the sample mean), over $50 billion (roughly the sample median), or using the definition of Penas and Unal (2004), we always reject that the spreadrating relationship for "big" banks was the same as for other banks.…”

Section: B) Robustness Testsmentioning

confidence: 92%

“…Morgan and Stiroh (2001), Sironi (2003), andKwast et al (2004) also find evidence of market discipline. 2 Penas and Unal (2004) classify a bank as TBTF if its assets exceed two percent of all bank assets. They find that bank bond prices react most favorably to merger announcements when the merger might elevate two medium sized banks to TBTF status.…”

mentioning

confidence: 99%

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Too Big to Fail after All These Years

Morgan

Stiroh

2005

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe naming of eleven banks as "too big to fail (TBTF)" in 1984 led bond raters to raise their ratings on new bond issues of TBTF banks about a notch relative to those of other, unnamed banks. The relationship between bond spreads and ratings for the TBTF banks tended to flatten after that event, suggesting that investors were even more optimistic than raters about the probability of support for those banks. The spread-rating relationship in the 1990s remained flatter for TBTF banks (or their descendants) even after the passage of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), suggesting that investors still see those banks as TBTF. Until investors are disabused of such beliefs, investor discipline of big banks will be less than complete.

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mentioning

confidence: 65%

Section: B) Robustness Testsmentioning

confidence: 92%

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Too Big to Fail after All These Years

Morgan

Stiroh

2005

SSRN Journal

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“…19 While Benston, Hunter, and Wall (1995) reject this hypothesis for the years 1981 to 1986, the evidence for the 1990s in Kane (2000) and Penas and Unal (2001) is consistent with the hypothesis.…”

mentioning

confidence: 78%

Banks without Parachutes - Competitive Effects of Government Bail-out Policies

Hakenes

Schnabel

2004

SSRN Journal

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Abstract:The explicit or implicit protection of banks through government bail-out policies is a universal phenomenon. We analyze the competitive effects of such policies in two models with different degrees of transparency in the banking sector. Our main result is that the bail-out policy unambiguously leads to higher risk-taking at those banks that do not enjoy a bail-out guarantee. The reason is that the prospect of a bail-out induces the protected bank to expand, thereby intensifying competition in the deposit market and depressing other banks' margins. In contrast, the effects on the protected bank's risk-taking and on welfare depend on the transparency of the banking sector.

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“…They find that banks experienced significant negative abnormal returns on average for the period three years following the merger. Penas and Unal [28] find evidence of bondholder gains of acquiring banks, as a result of diversification, the achievement of too-big-too-fail status and synergy gains. They also identify significant positive correlation between announcement-month bond and equity returns, which proves that bank merger wealth creating rather than shifting wealth from shareholders to bondholders.…”

Section: The Impacts Of Mandas On Us Banking Industry: a Review Of Mementioning

confidence: 99%

Are All Bank Acquisitions Equal? The Impact of Bank Mergers and Acquisitions around the 2007-2009 Financial Crisis: Evidence from TARP

King¹,

Kong²

2016

J Account Mark

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The large wave of bank mergers, which had affected the US bank sector in the years leading 2007-2009 crisis, experienced a sudden decline in both volume and value in the post-financial crisis period. This study examines whether TARP banks, i.e. banks that received government financial support during the recent 2007-2009 crisis, differed in terms of M&A financial performance outcomes in the pre and post financial crisis periods compared to non-TARP recipients. We find significant and differences in the post-merger financial performance of TARP recipients compared to non-TARP recipients in the post financial crisis period but no significant differences in their pre-merger performance. Our results infer differences in merger motivations for TARP and non-TARP banks.

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Gains in Bank Mergers: Evidence from the Bond Markets

Cited by 83 publications

References 28 publications

Too Big to Fail after All These Years

Too Big to Fail after All These Years

Banks without Parachutes - Competitive Effects of Government Bail-out Policies

Are All Bank Acquisitions Equal? The Impact of Bank Mergers and Acquisitions around the 2007-2009 Financial Crisis: Evidence from TARP

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