Do "white knights" make excessive profits in bank resolution?

  • This study looks at potential windfall profits for the four banking acquisitions in 2023. Based on accounting figures, an FT article states that a total of USD 44bn was left on the table. We see accounting figures as a misleading analysis. By estimating marked-based cumulative abnormal returns (CAR), we find positive abnormal returns in all four cases which when made quantifiable, are around half of the FT’s accounting figures. Furthermore, we argue that transparent auctions with enough bidders should be preferred to negotiated bank sales. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.

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Author:Florian HeiderORCiDGND, Jonas SchlegelGND, Tobias TrögerORCiDGND, Mark WahrenburgORCiDGND
Series (Serial Number):SAFE white paper series (98)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/11/30
Tag:"Event Study"; Auctions; Bank Acquisition; Bank Resolution
Edition:November 2023
Page Number:28
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht