"The numbers are staggering..." says Professor Robert DeYoung, KU School of Business Capitol Federal Chair in Financial Markets and Institutions, "...when you think about all of the mergers among financial institutions that have occurred during the past ten years, and these mergers are taking place all around the globe."
And DeYoung has the facts to support this statement. Here’s what he’s talking about:
- $1.7 trillion worth of mergers among U.S. financial institutions
- $1.4 trillion worth of mergers among financial institutions in Europe
- Nearly $1 trillion worth of cross-border mergers between U.S. and European financial institutions
Suffice it to say, there’s a whole lot of merging going on out there!
All of this merger and acquisition activity was the subject of an international conference held in Arlington, Virginia, on November 30 and December 1, 2007. The conference was sponsored by the KU School of Business in partnership with the Capitol Federal Foundation, the Federal Deposit Insurance Corporation and the Federal Reserve Bank of Chicago.
This conference brought together 120 of the world’s finest financial market researchers, regulators and practitioners. Research papers were presented and discussed by experts from universities, central banks and regulatory agencies in the U.S., Japan, China, Germany, Spain, the Netherlands, France, Italy and the UK.
"There has been a phenomenal wave of change and modernization in financial services, financial markets, and financial institutions world-wide over the past decade" said DeYoung. "Most of these changes have been accompanied by mergers that have made banks and other financial institutions much larger, and turned many of them into global players." Financial institutions include banks, insurance companies, securities firms and stock exchanges.
"The new research results presented for the first time at this conference not only informed the international audience at the conference, but it also will surely stimulate ideas for further research." DeYoung observed that new relationships were made between academics and regulators for the U.S., Europe and Asia, and that these relationships will enable research to provide answers to questions like:
- Are these mergers good for the companies that do them?
- Are these mergers good for the households and businesses that consume financial services?
- Does financial regulation need to be adjusted in light of all these mergers?
New research presented at the conference generated some interesting findings. For example:
- Even though the most well-known banking companies in the U.S. and abroad continue to grow larger, small banks continue to do a better job at extending credit to small businesses.
- Merging banks tend to offer lower deposit rates after the merger.
- Small credit unions are disappearing at a rapid rate in the U.S., but the larger credit unions that acquire them continue to be financially viable.
- Bank mergers are more likely to create value for shareholders when the pay of bank managers is linked to the financial performance of the merging banks.
Joining DeYoung as co-chairs for the conference were Doug Evanoff, Vice President for Financial Markets Research at the Federal Reserve Bank of Chicago, and Phil Molyneux, head of the Banger University School of Business in Wales.
In addition to his teaching and research duties at KU, DeYoung is a visiting scholar at the Federal Reserve Bank of Kansas City, a research program coordinator at the FDIC’s Center for Financial Research, and an editor of the Journal of Financial Services Research. DeYoung has a strong interest and history in bringing together academic research and actual banking practice. His research focuses on the evolution of domestic and international financial markets and the performance of the firms that operate in those markets. He has published numerous articles and book chapters related to banking and financial institutions.
The conference proceedings will be published in a special issue of the Journal of Financial Services Research in 2008.
