Journal of Financial Stability Vol. 21 2015
Bank consolidation and stability: The Canadian experience, 1867–1935
Abstract
Transfer-function estimation results for bank M&As in Canada during 1867–1935 support the concentration-stability hypothesis. The systemic stability is attributed to risk reduction through geographic diversification as 2/3 of the M&As were cross-province acquisitions. Furthermore, our empirical findings together with a probabilistic theoretical model support the efficiency hypothesis rather than the imminent failure hypothesis. They not only shed light on the debate in the literature but also have policy lessons for M&As today. More specifically, two mega-mergers would have been denied according to the concentration ratio or HHI criteria commonly used in merger guidelines today, thus hindering banks’ risk reduction through consolidation.
- DOI
- 10.1016/j.jfs.2015.08.007
- Volume
- 21
- Pages
- 46-60
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref