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GOVERNANCE‐BASED ACQUISITIONS AND RISK TAKING IN BANKING *
Author(s) -
BARRIOS VÍCTOR E.,
GRANERO LUIS M.
Publication year - 2008
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2008.01065.x
Subject(s) - corporate governance , incentive , loan , business , financial intermediary , intermediary , financial system , finance , profit (economics) , economics , monetary economics , industrial organization , microeconomics
We examine the market for corporate control in banking when strategic acquisitions are driven by the different governance structures of commercial and savings banks. In contrast to profit‐maximizing entities, we show that savings institutions can have acquisition incentives from their peculiar governance and ownership structure. Governance‐based acquisition incentives, which interact with the specifics of the loan market in affecting bank risk taking, can arise when acquisitions take place sequentially or simultaneously, and also when financial intermediaries affect risk taking directly through the target return of investments or indirectly through the loan interest rate.