Do Bank Mergers Really Work?
Even as the debate continues over how to stabilize the financial system, the debate over how the financial system should be regulated in the future has already started. Over the next few months, we plan to bring you a number of posts from guest contributors on various aspects of financial regulation.
For today, I'd like to recommend an article by Lawrence Baxter, a faculty member at the Duke School of Law and a former banking executive, on the issue of bank size. Drawing on his experiences with bank mergers, Baxter describes the problems that can result when banks grow too big for effective management and monitoring.
For example, although technology synergies are widely cited as a benefit of mergers, any benefits can be overwhelmed by the challenges of selecting and integrating computer systems. Mergers can also undermine the cultural strengths that create effective organizations. And excessive size, combined with modern technology, can make it easy for top executives to overlook their risk-management challenges.
The full article is posted at The Baseline Scenario.
By
James Kwak
|
May 7, 2009; 5:56 AM ET
Categories:
Banking
,
Regulation
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Posted by: hoipolloi | May 8, 2009 10:28 AM | Report abuse
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Studies prove that more than 90% of corporate mergers and acquisitions are falling short of their objectives. Most mergers are initiated by megalomanic CEO's who overlook the vital intangible assets such as business culture, company strategics, human capital, company structure and corporate governance.
But what can you expect from people who only move in the highest management levels and are only use to look at computer models and balance sheets,,,