This study estimates the effects of allowing bank holding companies (BHCs) to enter several lines of financial business not now permitted. A simulation technique is used to estimate the risk and return of hypothetical financial corporations after merger between a BHC and a large firm in each of these industries: securities, real estate, life insurance, property and casualty insurance, and insurance agencies. The study concludes that a merger between a BHC and a life insurance company may decrease the probability of bankruptcy for the merged firm relative to the BHC alone. This result does not hold true, however, for BHC mergers with firms in the other industries. In particular, BHC mergers with securities or real estate firms are found to increase the probability of bankruptcy.
- G28 - Financial institutions and services - Government policy and regulation
- G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages
- G32 - Corporate finance and governance - Financing policy ; Financial risk and risk management ; Capital and ownership structure
- The profitability and risk effects of allowing bank holding companies to merge with other financial firms : a simulation study / John H. Boyd, Stanley L. Graham.
- Federal Reserve Bank of Minneapolis. Research Division.
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