Financial Institutions and Banks Mergers : Regulation, Efficiency, Value Creation and Risk. / Hassan, Mohamad.

2020. 322 p.

Research output: ThesisDoctoral Thesis

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@phdthesis{7d88d4f31955441ba6aa5339f3f95af6,
title = "Financial Institutions and Banks Mergers: Regulation, Efficiency, Value Creation and Risk",
abstract = "Ring-fencing and higher capital requirements are the themes of the 2008-2011 crisis aftermath regulations worldwide. However, banks are moaning the pressing effects of these regulations on their profits and efficiencies, pursuing them to innovate. Innovation usually leads to deregulation, which gradually becomes a system-wide risk. This thesis utilises the Institutional Theory to investigate how financial institutions can expand through consolidation to grow profitably via maximising returns and wealth but also limiting risks.Results show that Market and Product Development strategies enable value creation for shareholders both in short and the long run, while Diversification strategies do not. Shareholders value drives long-run economic value for North American bank, but this value is adversely affected by credit risk appetite in Australasian bank focused mergers. Results emphasise the negative impact of high capital buffers (Basel III) on funds available for lending. Official supervisory powers drive productivity growth in all regions except Europe and Central Asia. Activity restrictions on real estate, insurance, and securities businesses, are negatively associated with productivity change in all Income level groups but High Income.Improvements in pure technical efficiency appear to be at the cost of equity value and profitability. On the risk frontier, systematic risk is negatively influenced by economic value addition, financial freedom and bank concentration, but positively associated with return on assets and leverage growth. This outcome provides evidence that improvements in operating profit and well-controlled cost of capital can undoubtedly contribute to decreasing systematic risks. National bank deals, focused and diversified, appear to have less systematic risk generated in the realm of more financial freedom accompanied by a moderate to a high concentration. Large banks contribute to increasing the systemic risk contribution in national deals. Sustainability growth rate improves in all diversifying deals and decreases systemic risk. ",
keywords = "Shareholder Value, Financial crisis impact, Ring-fencing, Diversification Strategies, Economic Value Addition, Event Study and Buy and Hold methods, Wealth Maximisation, Financial Institutions Mergers, Bank regulation and Supervision, Basel Accords, Total Factor Productivity, Bank Efficiency, Productivity Growth, Financial Sector Stability, Malmquist Output oriented index, or Data Envelopment Analysis, reallocation of production frontiers, Bank Regulations Impact Efficiency and Performance, Bank Mergers; the cyclical behaviour of regulation, risk and returns, Consolidation Strategic Choices, Systemic Risk, Focus and Diversification, Capital Shortfalls, Long Run Marginal Expected Shortfall, Bank Mergers{\textquoteright} Risks, Macro and Micro Prudential",
author = "Mohamad Hassan",
year = "2020",
language = "English",
school = "Royal Holloway, University of London",

}

RIS

TY - THES

T1 - Financial Institutions and Banks Mergers

T2 - Regulation, Efficiency, Value Creation and Risk

AU - Hassan, Mohamad

PY - 2020

Y1 - 2020

N2 - Ring-fencing and higher capital requirements are the themes of the 2008-2011 crisis aftermath regulations worldwide. However, banks are moaning the pressing effects of these regulations on their profits and efficiencies, pursuing them to innovate. Innovation usually leads to deregulation, which gradually becomes a system-wide risk. This thesis utilises the Institutional Theory to investigate how financial institutions can expand through consolidation to grow profitably via maximising returns and wealth but also limiting risks.Results show that Market and Product Development strategies enable value creation for shareholders both in short and the long run, while Diversification strategies do not. Shareholders value drives long-run economic value for North American bank, but this value is adversely affected by credit risk appetite in Australasian bank focused mergers. Results emphasise the negative impact of high capital buffers (Basel III) on funds available for lending. Official supervisory powers drive productivity growth in all regions except Europe and Central Asia. Activity restrictions on real estate, insurance, and securities businesses, are negatively associated with productivity change in all Income level groups but High Income.Improvements in pure technical efficiency appear to be at the cost of equity value and profitability. On the risk frontier, systematic risk is negatively influenced by economic value addition, financial freedom and bank concentration, but positively associated with return on assets and leverage growth. This outcome provides evidence that improvements in operating profit and well-controlled cost of capital can undoubtedly contribute to decreasing systematic risks. National bank deals, focused and diversified, appear to have less systematic risk generated in the realm of more financial freedom accompanied by a moderate to a high concentration. Large banks contribute to increasing the systemic risk contribution in national deals. Sustainability growth rate improves in all diversifying deals and decreases systemic risk.

AB - Ring-fencing and higher capital requirements are the themes of the 2008-2011 crisis aftermath regulations worldwide. However, banks are moaning the pressing effects of these regulations on their profits and efficiencies, pursuing them to innovate. Innovation usually leads to deregulation, which gradually becomes a system-wide risk. This thesis utilises the Institutional Theory to investigate how financial institutions can expand through consolidation to grow profitably via maximising returns and wealth but also limiting risks.Results show that Market and Product Development strategies enable value creation for shareholders both in short and the long run, while Diversification strategies do not. Shareholders value drives long-run economic value for North American bank, but this value is adversely affected by credit risk appetite in Australasian bank focused mergers. Results emphasise the negative impact of high capital buffers (Basel III) on funds available for lending. Official supervisory powers drive productivity growth in all regions except Europe and Central Asia. Activity restrictions on real estate, insurance, and securities businesses, are negatively associated with productivity change in all Income level groups but High Income.Improvements in pure technical efficiency appear to be at the cost of equity value and profitability. On the risk frontier, systematic risk is negatively influenced by economic value addition, financial freedom and bank concentration, but positively associated with return on assets and leverage growth. This outcome provides evidence that improvements in operating profit and well-controlled cost of capital can undoubtedly contribute to decreasing systematic risks. National bank deals, focused and diversified, appear to have less systematic risk generated in the realm of more financial freedom accompanied by a moderate to a high concentration. Large banks contribute to increasing the systemic risk contribution in national deals. Sustainability growth rate improves in all diversifying deals and decreases systemic risk.

KW - Shareholder Value

KW - Financial crisis impact

KW - Ring-fencing

KW - Diversification Strategies

KW - Economic Value Addition

KW - Event Study and Buy and Hold methods

KW - Wealth Maximisation

KW - Financial Institutions Mergers

KW - Bank regulation and Supervision

KW - Basel Accords

KW - Total Factor Productivity

KW - Bank Efficiency

KW - Productivity Growth

KW - Financial Sector Stability

KW - Malmquist Output oriented index

KW - or Data Envelopment Analysis

KW - reallocation of production frontiers

KW - Bank Regulations Impact Efficiency and Performance

KW - Bank Mergers; the cyclical behaviour of regulation, risk and returns

KW - Consolidation Strategic Choices

KW - Systemic Risk

KW - Focus and Diversification

KW - Capital Shortfalls

KW - Long Run Marginal Expected Shortfall

KW - Bank Mergers’ Risks

KW - Macro and Micro Prudential

M3 - Doctoral Thesis

ER -