Three Decades of Failed Bank Acquisitions

Spokeviciute, Laima; Jahanshahloo, Hossein; Keasey, Kevin; Vallascas, Francesco

Abstract

Using more than 30 years of data, we document that the acquisition of failed US commercial banks through FDIC-managed Purchase and Assumption (P&A) transactions leads to long-term improvements in the profitability and loan risk of the combined entity and has no detrimental effects on its capital adequacy. These results are generally stronger for transactions with greater potential for economies of scale and efficiency gains. Furthermore, geographic similarity in the branch network of the acquirer and the target marginally improves the profitability of the combined entity, while a greater business similarity between the merged banks has no effect on deal outcomes. Additional tests show that the presence of regulatory subsidies also improves the profitability of the combined entity. Finally, we find no support for theoretical predictions about the misallocation of failed bank assets in the presence of widespread failures in local markets. Our findings are important for the understanding of the consequences of bank resolution through assisted M&As.

Citation

Spokeviciute, L., Jahanshahloo, H., Keasey, K., & Vallascas, F. (2025). Three Decades of Failed Bank Acquisitions. Journal of Banking and Finance, 170, Article 107336. https://doi.org/10.1016/j.jbankfin.2024.107336

• Journal Article Type: Article
• Acceptance Date: Nov 7, 2024
• Online Publication Date: Nov 10, 2024
• Publication Date: 2025-01
• Deposit Date: Nov 11, 2024
• Publicly Available Date: Nov 11, 2024
• Journal: Journal of Banking & Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 170
• Article Number: 107336
• DOI: https://doi.org/10.1016/j.jbankfin.2024.107336
• Public URL: https://durham-repository.worktribe.com/output/3090955