TY - JOUR

T1 - 'Too Systemically Important To Fail’ in Banking – Evidence from Bank Mergers and Acquisitions

AU - Molyneux, P.

AU - Schaeck, K.

AU - Zhou, T.M.

PY - 2014/4/2

Y1 - 2014/4/2

N2 - In this paper, we examine the systemic risk implications of banking institutions that are considered ‘Too-systemically-important- to-fail’ (TSITF). We exploit a sample of bank mergers and acquisitions (MandAs) in nine EU economies between 1997 and 2007 to capture safety net subsidy effects and evaluate their ramifications for systemic risk. We find that safety net benefits derived from MandA activity have a significantly positive association with rescue probability, suggesting moral hazard in banking systems. We, however, find no evidence that gaining safety net subsidies leads to TSITF bank’s increased interdependency over peer banks

AB - In this paper, we examine the systemic risk implications of banking institutions that are considered ‘Too-systemically-important- to-fail’ (TSITF). We exploit a sample of bank mergers and acquisitions (MandAs) in nine EU economies between 1997 and 2007 to capture safety net subsidy effects and evaluate their ramifications for systemic risk. We find that safety net benefits derived from MandA activity have a significantly positive association with rescue probability, suggesting moral hazard in banking systems. We, however, find no evidence that gaining safety net subsidies leads to TSITF bank’s increased interdependency over peer banks

U2 - 10.1016/j.jimonfin.2014.03.006

DO - 10.1016/j.jimonfin.2014.03.006

M3 - Article

VL - 49

SP - 258

EP - 282

JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

SN - 0261-5606

IS - part B

ER -