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

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

Research output: Contribution to journalArticle

187 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 languageEnglish (US)
Pages (from-to)43-63
Number of pages21
JournalJournal of Banking and Finance
Volume17
Issue number1
DOIs
StatePublished - Feb 1993

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