Banking distress in MENA countries and the role of mergers as a strategic policy to resolve distress (original) (raw)
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Journal of Banking & Finance, 2007
The inability of most bank merger studies to control for hidden bailouts may lead to biased results. In this study, we employ a unique data set of approximately 1,000 mergers to analyze the determinants of bank mergers. We use data on the regulatory intervention history to distinguish between distressed and non-distressed mergers. We find that, among merging banks, distressed banks had the worst profiles and acquirers perform somewhat better than targets. However, both distressed and non-distressed mergers have worse CAMEL profiles than our control group. In fact, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention.
Bank management in bank decline: Bank mergers as a recovery recipe?
Journal of Economic & Financial Studies, 2014
1. We find that decline in banking cannot be understood without looking at growth before decline. 2. Based on 309 Finnish bank mergers during 1990 to 2013, we found that many bank managers gradually lost their confidence concerning their capability of successfully running their banks, thus choosing to merge. 3. Mergers have been useful as a mean for continuation of banking activity. However, the Finnish evidence points to the fact that banks that don't merge will perform better than banks that are involved in merger processes. 4. Finally, we have developed a model for explaining bank mergers as a way out from crisis situations.
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Financial crisis changes economists' rules and perspectives each time it hits the global economy. The catastrophic consequences affect all economic sectors and change conventional policy solutions. Mergers and acquisitions as economic activities have regulations and trends in normal economic times. However, in recent crises, mergers and acquisitions transactions indicate various behaviors and trends in banking institutions. By collecting mergers and acquisitions data of banks from authenticated sources and analyzing it based on crisis time. The current study covered the financial crises of black Monday in 1987, the Asian stock market crashes in 1997, the Dotcom bubble in 2002, and mortgage loans in 2009. The significant findings are that approximately 80% of crisis boost mergers and acquisitions transactions, specifically in countries where the crisis originated. On the other hand, the rest where mergers and acquisitions decline under crisis is attributed to going most deteriorating banks into liquidation or nationalization, causing a decline in the number of banks that are candidates to acquire under the effect of the crisis.
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Risk Governance and Control: Financial Markets & Institutions, 2015
The inactivity of banks may be the result of a number of events, such as merger & acquisition (M&A), liquidation, default-bankruptcy, etc. All these phenomena of inactivity contribute to the same result, the reform of the European banking sector and they may have the same causes. The paper will address the issue of inactivity and will try to detect its causes using econometric models. Six groups of indicators are examined: performance, size, ownership, corporate governance, capital adequacy or capital structure and loan growth. Three econometric methods (Probit, Logit, OLS) have been used to create a system that predicts inactivity. The results of the econometric models show that from the six groups of indicators, four have been found to be statistically important (performance, size, ownership, corporate governance). Two have a negative impact (ownership, corporate governance) on the probability of inactivity and two positive (performance, size). The paper’s value and innovation is ...
Estimating the impact of bank mergers: an application to the Portuguese banking system
2011
Most studies assessing the impact of bank mergers analyze the differential impact of these processes on a number of variables that characterize the banking system. However, this approach has important limitations, ignoring endogenous changes in market structure that might occur after the merger. This article analyzes the impact on credit markets of a number of bank mergers in the Portuguese banking system using this methodology usually employed in the literature, as well as an alternative methodology based on the estimation of a structural model, which allows for the derivation of a counterfactual scenario. In this framework it becomes possible to evaluate, using this structural model, what would have happened if the mergers had not occurred. We fi nd that these mergers have contributed to a decrease in loan interest rates larger than what could have been anticipated. The fl ow of credit to non fi nancial fi rms was larger than what was suggested by the combination of the pre-merger equilibrium with the post-merger environment. In contrast, the fl ow of loans to households was lower than expected, even though the loans granted to this sector have recorded a signifi cant growth during the period analysed.
Bank mergers: the cyclical behaviour of regulation, risk and returns
Abstract-Indexing, 2021
Purpose The purpose of this paper is to examine the effects of bank mergers on systemic and systematic risks on the relative merits of product and market diversification strategies. It also observes determinants of M&A deals criteria, product and market diversification positioning, crisis threshold and other regulatory and market factors. Design/methodology/approach This research examines the impact and association between merger announcements and regulatory reforms at bank and system levels by investigating the impact of various bank consolidation strategies on firms' risks. We estimate beta(s) as an index of financial institutions' systematic risk. We then develop an index of the estimated equity value loss as the long-rum marginal expected shortfall (LRMES). LRMES contributes to compute systemic risk (SRISK) contribution of these firms, which is the capital that a firm is expected to need if we have another financial crisis. Findings Large acquiring banks decrease systemic risk contribution in cross-border M&As with a non-bank financial institution, and witness profitability (ROA) gains, supporting geographic diversification stability. Capital requirements, activity restrictions and bank concentration increase systemic risk contribution in national mergers. Bank mergers with investment FIs targets enhance productivity but impair technical efficiency, contrary to bank-real estate deals where technical efficiency change accompanied lower systemic risk contribution. Practical implications Financial institutions are recommended to avoid trapped capital and liquidity by efficiently using local balance sheet and strengthening them via implementing models that clearly set diversification and netting benefits to determine capital reserves and to drive capital efficiency through the clarity on product-activity-geography diversification and focus. This contributes to successful ringfencing, decreases compliance costs and maximises returns and minimises several risks including systemic risk.
Social Science Research Network, 2021
In this paper we analyse the bank merger between DnB and Gjensidige Bank in 2003, ranked by market share as number one and number three in the Norwegian bank market. Focusing on loans to firms, our difference-indifferences analysis shows no increase of concentration of new loans. The concentration in affected markets (markets where both merging parties were present) developed similarly to unaffected markets. Moreover, the interest rate tended to be lower in the affected markets relative to unaffected markets, but this relationship is weak and not statistically significant. The merger also affected the riskiness of loans only marginally. These weak effects could be the result of efficiency gains in the form of lower costs being pass-through to customers, and the increased market power (and consequently higher interest rates) cancelled each other out. The remedial measures imposed by the Norwegian Competition Authority on the two merging parties are also likely to explain some of the modest effects of the merger. The weak effects are largely coincident with international literature showing the effects of mergers and acquisitions in the banking sector to be modest.
Prediction of Banks Distress – Regional Differences and Macroeconomic Conditions
Acta Universitatis Lodziensis. Folia Oeconomica, 2019
In this study we focus on distress events of European banks over the period of 1990–2015, using unbalanced panel of 3,691 banks. We identify 132 distress events, which include actual bankruptcies as well as bailout cases. We apply CAMEL‑like bank‑level variables and control macroeconomic variables (GDP, inflation, unemployment rate). The analysis is based on traditional logistic regression and k‑means clustering. We find, that the probability of distress is connected with macroeconomic conditions via regional grouping (clustering). Bank‑level variables that were stable predictors of distress from 1 to 4 years prior to event are equity to total assets ratio (leverage) and loans to funding (liquidity). From macroeconomic factors, the GDP growth is a reasonable variable, however with differentiated impact: for 1 year distance high distress probability is connected with low GDP growth, but for 2, 3 and 4 year distance: high distress probability is conversely connected with high GDP grow...
Can Bank Mergers and Acquisitions Favour the Credit Availability for Tunisian Firms?
International Journal of Business and Management, 2012
Despite of the low size of banking Merger and acquisition (M&A) in Tunisia, we took the initiative to treat a subject which remains of topicality especially for the Tunisian context. We can consider this study like the first to be conducted in Tunisia. The aim of this paper is to empirically analyze the effect of Tunisian bank acquisition on the credit availability. On the basis of the data relating to 83 Tunisian companies in relation to the acquired bank (Banque de Sud according to the old denomination and Attijari Bank after acquisition) observed during the period 2001-2008 and in using the panel data technique, the results show that banking acquisition affects negatively and significantly the credit availability. Contrary to the literature based on this topic, the firm size is positively and significantly correlated with the credit availability whereas the effect of the bank size is no significant.
Predicting Financial Distress in Lebanese Non-Listed Banks
2019
The Study uses the Altman Z-score model for non-manufacturing companies and for emerging markets to examine the financial distress of private non-listed banks in the Lebanese banking sector using a sample of four banks including Bankmed, BBAC Bank, Credit Libanais Bank, and IBL Bank; covering the period from 2013 till 2017. The study also uses trend analysis in order to aid in predicting future performance for the chosen sample. The results show that all banks using the Z-score for non-manufacturing firms have a z below the cutoff of 1.1, which means bankruptcy is predicted in the near future which contradicts the current situation of such banks. While as for Z value for emerging markets is above the cutoff of 2.6 which means that such banks are acting within the safe financial zone. The trend analysis shows that Z is stable and improving for the majority of the banks in the sample.