How much would banks be willing to pay to become "too-big-to-fail" and to capture other benefits?
by Elijah Brewer
This paper examines an important aspect of the "too-big-to-fail" (TBTF) policy employed by regulatory agencies in the United States. How much is it worth to become TBTF? How much has the TBTF status added to bank shareholders' wealth? Using market and accounting data during the merger boom (1991-2004) when larger banks greatly expanded their size through mergers and acquisitions, we find that banking organizations are willing to pay an added premium for mergers that will put them over the asset sizes that are commonly viewed as the thresholds for being TBTF. We estimate at least $14 billion in added premiums for the nine merger deals that brought the organizations over $100 billion in total assets. These added premiums may reflect that perceived benefits of being TBTF and/or other potential benefits associated with size.
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How much would banks be willing to pay to become "too-big-to-fail" and to capture other benefits?
2007, Research Division, Federal Reserve Bank of Kansas City
Electronic resource
in English
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Title from PDF file (viewed on Dec. 27, 2007).
"July 2007."
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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| December 19, 2020 | Edited by MARC Bot | import existing book |
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