Can mergers in Europe help banks hedge against macroeconomic risk?
This study investigates the motive of geographic risk diversification in the lending activity for bank mergers in the EU on a sample of large banking groups. Geographic diversification should allow banks to reduce their risk. It is observed that the loan portfolios of European banks are home-biased. The portfolio approach is applied to explore the risk-return efficiency of the locations of banks' activities. Mergers between pairs of banks are also studied. Evidence of the sub-optimality of the loan portfolios of European banks in terms of geographic risk diversification, and of the existence of potential gains from inter-country pair mergers is also provided.
Year of publication: |
2005
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Authors: | Meon, Pierre-Guillaume ; Weill, Laurent |
Published in: |
Applied Financial Economics. - Taylor & Francis Journals, ISSN 0960-3107. - Vol. 15.2005, 5, p. 315-326
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Publisher: |
Taylor & Francis Journals |
Saved in:
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