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The Geographic Location of Risk and Cross-Border Bank Mergers

By Yakov Amihud A, Gayle L. Delong B, Anthony Saunders A and Baruch College


Although the number of cross-border bank mergers is increasing, little research exists concerning such mergers. We know little about the amount and location of risk after such an event. This study examines the risk profiles of 214 cross-border bank mergers. We find that overall risk neither increases nor decreases for the acquiring bank, but that risk does shift either from the home to the host country or from the host to the home country. We also find that investors react positively when risk increases in the home country of the acquirer, but negatively if worldwide risk increases. The findings suggest that investors expect domestic regulators to rescue domestic banks, but not foreign banks or the foreign operations of their domestic banks. a New York University

Topics: Banks, Mergers, Market reaction, International business. Geographic expansion has long been touted as a way for banks to reduce risk., the
Year: 2001
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