Mergers in financial services and overlending
DOI:
https://doi.org/10.32826/cude.v42i116.80Keywords:
Banking efficiency, behavioural finance, mergers, herding, merger paradox, overconfidenceAbstract
In this paper we build a model of banking competition that considers a managerial-overconfidence setup resulting in two main findings. First, a merger between rational banks may change their behaviour in that, in post-merger conditions, they would follow the overconfident bank when they would not have done so pre-merger, thereby amplifying the credit boom. Second, the results overcome the merger paradox, in the sense that the merger would be profitable for participants, and thus intrinsically stable.
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2018-04-11
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