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The implications of the complexity of banks on M&As, nontraditional banking activities and corporate governance: evidence from the US banking sector

The implications of the complexity of banks on M&As, nontraditional banking activities and corporate governance: evidence from the US banking sector
The implications of the complexity of banks on M&As, nontraditional banking activities and corporate governance: evidence from the US banking sector

This thesis focuses on the study of the complexity of entities in the US banking sector. To this end, three lines of research are pursued in this thesis. We start with an investigation analysing the importance of strategic fit for post-M&A performance, which is one of the necessary prior steps for a financial institution to become complex. Second, we extend our investigation to analyse the effectiveness of the Dodd-Frank Act. 2010 to control the risk and non-traditional banking activities of complex bank holding companies. This law is considered one of the main avenues for the US government to control the continuously growing complexity of financial institutions. Lastly, we explore the influence of the complexity of banks on the composition of their board according to the degree of busyness of board members in terms of sitting on other boards.

Using different econometric approaches and different samples, we present robust evidence for several findings. Firstly, strategic fit plays a key role as a performance enhancing factor for banks that decide to expand their market and/or diversify their products portfolio through pursuing merger deals. The subsequent analysis finds that the Dodd-Frank Act. 2010 has distinct effects on the risk and non-banking activities among the different types of complex BHCs. Moreover, we present differences between large and consolidated BHCs in their “shadow” banking activities following the enactment of this law. Furthermore, we observe that banks continue increasing their proportions of independent directors. However, banks require independent board members with fewer commitments from outside boards. Lastly, the busyness degree of the executive board members is related to the organisational complexity between banks and their subsidiaries.

The empirical results give rise to numerous important policy implications. The supervision of a proper degree of strategic fit in key aspects between merging entities before a merger approval might increase the probability to achieve positive post-mergers outputs and reduce early bailouts that affect local economies. Furthermore, the recent re-regulatory changes have achieve to partially increase the stability of BHCs in which policy makers should consider the nature of complexity to have a better control of their risk, especially placing limits on their risky non-traditional banking activities. Finally, it has highlighted the importance of laws, related to the appointment of the board members, to take into account the individual complexity of each banking institution.

University of Southampton
Mayorga Serna, Daniel
603bfdc5-1820-4526-bed2-92b2d04fa3ee
Mayorga Serna, Daniel
603bfdc5-1820-4526-bed2-92b2d04fa3ee
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e

Mayorga Serna, Daniel (2017) The implications of the complexity of banks on M&As, nontraditional banking activities and corporate governance: evidence from the US banking sector. University of Southampton, Southampton Business School, Doctoral Thesis, 173pp.

Record type: Thesis (Doctoral)

Abstract

This thesis focuses on the study of the complexity of entities in the US banking sector. To this end, three lines of research are pursued in this thesis. We start with an investigation analysing the importance of strategic fit for post-M&A performance, which is one of the necessary prior steps for a financial institution to become complex. Second, we extend our investigation to analyse the effectiveness of the Dodd-Frank Act. 2010 to control the risk and non-traditional banking activities of complex bank holding companies. This law is considered one of the main avenues for the US government to control the continuously growing complexity of financial institutions. Lastly, we explore the influence of the complexity of banks on the composition of their board according to the degree of busyness of board members in terms of sitting on other boards.

Using different econometric approaches and different samples, we present robust evidence for several findings. Firstly, strategic fit plays a key role as a performance enhancing factor for banks that decide to expand their market and/or diversify their products portfolio through pursuing merger deals. The subsequent analysis finds that the Dodd-Frank Act. 2010 has distinct effects on the risk and non-banking activities among the different types of complex BHCs. Moreover, we present differences between large and consolidated BHCs in their “shadow” banking activities following the enactment of this law. Furthermore, we observe that banks continue increasing their proportions of independent directors. However, banks require independent board members with fewer commitments from outside boards. Lastly, the busyness degree of the executive board members is related to the organisational complexity between banks and their subsidiaries.

The empirical results give rise to numerous important policy implications. The supervision of a proper degree of strategic fit in key aspects between merging entities before a merger approval might increase the probability to achieve positive post-mergers outputs and reduce early bailouts that affect local economies. Furthermore, the recent re-regulatory changes have achieve to partially increase the stability of BHCs in which policy makers should consider the nature of complexity to have a better control of their risk, especially placing limits on their risky non-traditional banking activities. Finally, it has highlighted the importance of laws, related to the appointment of the board members, to take into account the individual complexity of each banking institution.

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Published date: January 2017
Organisations: University of Southampton, Southampton Business School

Identifiers

Local EPrints ID: 404901
URI: http://eprints.soton.ac.uk/id/eprint/404901
PURE UUID: 90f7b03a-e44a-42e7-a710-3cf805d669f5
ORCID for Simon Wolfe: ORCID iD orcid.org/0000-0001-9815-9535

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Date deposited: 18 Feb 2017 00:23
Last modified: 30 Jul 2019 00:39

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