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Working Paper

The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition

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The effect of regulations on the banking sector is a key question for financial intermediation. This paper provides evidence that merger control regulation, although not directly targeted at the banking sector, has substantial economic effects on bank mergers. Based on an extensive sample of European countries, we show that target announcement premia increased by up to 16 percentage points for mergers involving control shifts after changes in merger legislation, consistent with a market expectation of increased profitability. These effects go hand-in-hand with a reduction in the propensity for mergers to create banks that are too-big-to-fail in their country.
Topics
Bank policy and regulation
07.05.2019ISSN 2573-7953 WP 16-14R2Original Paper WP 16-14Revisions WP 16-14RDOI 10.26509/frbc-wp-201614r2
Keywords banks, regulation, mergers and acquisitions, merger control, antitrust
JEL Classification Codes G21, G34, K21, L40

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Carletti, Elena, Steven Ongena, Jan-Peter Siedlarek, and Giancarlo Spagnolo. 2019. “The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition.” Federal Reserve Bank of Cleveland, Working Paper No. 16-14R2. https://doi.org/10.26509/frbc-wp-201614r2