skip to primary navigationskip to content
 

Professor Andrew Karolyi - The role of regulation in cross-border bank acquisitions: Is it really a ‘race to the bottom’?

When Jan 22, 2012
from 05:00 PM to 06:00 PM
Where Newnham College
Contact Name
Add event to calendar vCal
iCal

The role of regulation in cross-border bank acquisitions:

Is it really a ‘race to the bottom’?

G. Andrew Karolyi (Cornell University) and Alvaro G. Taboada (University of Tennessee)

Abstract

We study how differences in bank regulation influence cross-border bank acquisition flows, share price reactions to cross-border deal announcements, and post-acquisition bank performance. Using a sample of 5,125 domestic and 793 majority cross-border deals announced between 1995 and 2008, we find that cross-border bank acquisition flows involve primarily acquirers from countries with stronger supervision and stricter capital requirements than those of their targets. This finding is consistent with a form of “regulatory arbitrage” that facilitates a destructive “race to the bottom” in bank regulations in which national regulators become less able to constrain excess risk-taking. However, a target bank’s abnormal returns around the deal announcements are higher when acquirers come from countries with more restrictive bank regulatory environments even after accounting for the acquirer’s attributes, which implies a more benign motive for regulatory arbitrage. Deals involving high-risk acquirers from countries with tougher capital requirements are associated with more adverse share-price reactions. Finally, we uncover a reduction in risk-taking following acquisition completion for acquirers in cross-border deals involving targets in weaker regulatory regimes, casting further doubt on the harmful effects of regulatory arbitrage in cross-border bank acquisitions.

« December 2019 »
December
MoTuWeThFrSaSu
1
2345678
9101112131415
16171819202122
23242526272829
3031

RSS Feed Latest news

Winners of the Best Student Paper Award 2018 announced

Aug 21, 2018

Cambridge Finance is proud to announce the winners of the Best student Paper Award for 2017-2018

View all news

Upcoming events

Cambridge Finance Workshop - Anne Villamil

Jan 23, 2020

Upper Hall, Peterhouse College, Cambridge CB2 1RD

Cambridge Finance Workshop - Alberto Manconi

Feb 06, 2020

Upper Hall, Peterhouse College, Cambridge CB2 1RD

Cambridge Finance Workshop - Ernst Maug

Feb 20, 2020

KH107, Keynes House, Cambridge Judge Business School

Previous events

Upcoming events