Bank holding company mergers with nonbank financial firms: Effects on the risk of failure

John H. Boyd; Stanley L. Graham; R. Shawn Hewitt

doi:10.1016/0378-4266(93)90079-S

Bank holding company mergers with nonbank financial firms: Effects on the risk of failure

John H. Boyd, Stanley L. Graham, R. Shawn Hewitt

Finance

Research output: Contribution to journal › Article › peer-review

259 Scopus citations

Abstract

An important issue in the debate over whether bank holding companies (BHCs) should be permitted to enter nonbanking activities is the effect of expanded nonbanking powers on BHC risk. We test this issue empirically by simulating mergers between BHCs and firms in nonbanking financial industries, calculating risk measures for the hypothetical merged firms, and comparing their risk characteristics with those of actual unmerged BHCs. We find that mergers of BHCs with life insurance or property/casualty insurance firms may reduce risk, but that mergers of BHCs with securities firms or real estate firms would likely increase risk.

Original language	English (US)
Pages (from-to)	43-63
Number of pages	21
Journal	Journal of Banking and Finance
Volume	17
Issue number	1
DOIs	https://doi.org/10.1016/0378-4266(93)90079-S
State	Published - Feb 1993

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abstract = "An important issue in the debate over whether bank holding companies (BHCs) should be permitted to enter nonbanking activities is the effect of expanded nonbanking powers on BHC risk. We test this issue empirically by simulating mergers between BHCs and firms in nonbanking financial industries, calculating risk measures for the hypothetical merged firms, and comparing their risk characteristics with those of actual unmerged BHCs. We find that mergers of BHCs with life insurance or property/casualty insurance firms may reduce risk, but that mergers of BHCs with securities firms or real estate firms would likely increase risk.",

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Bank holding company mergers with nonbank financial firms: Effects on the risk of failure

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