The real effects of distressed bank mergers

Dinger, Valeriya ; Schmidt, Christian ; Theissen, Erik

Document Type: Working paper
Year of publication: 2021
Place of publication: Mannheim
Publication language: English
Institution: Business School > ABWL u. Finanzierung (Theissen 2009-)
Subject: 330 Economics
Abstract: In this paper we revisit the question whether negative shocks to banks have adverse real economic effects. We analyze German savings banks and propose a new identification strategy. We consider distressed mergers and interpret them as exogenous shocks to the (initially non-distressed) acquiring bank. We find that in the years after a distressed merger (i) the performance of acquiring savings banks deteriorates; (ii) the shock is transmitted to firms in the acquirer’s region who cut back their investments and (iii) the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading to lower investment and employment growth. To justify a causal interpretation of our results we perform several additional tests that establish the exogeneity of the shock to the acquiring bank with respect to local economic dynamics.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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