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Auctions of failed banks: an analysis of losing bidders

Tim Zhou Orcid Logo

Review of Quantitative Finance and Accounting, Volume: 61

Swansea University Author: Tim Zhou Orcid Logo

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DOI (Published version): 10.1007/s11156-023-01146-3

Abstract

Between 2007 and 2013, the Federal Deposit Insurance Corporation (FDIC) used purchase and assumption (P&A) as a resolution method to auction 492 failed institutions to healthy banks. While existing studies reveal positive value effects on winning bidders of these auctions, this study finds that...

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Published in: Review of Quantitative Finance and Accounting
ISSN: 1573-7179
Published: Springer Nature
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URI: https://cronfa.swan.ac.uk/Record/cronfa62940
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first_indexed 2023-03-22T11:43:53Z
last_indexed 2023-04-15T03:22:21Z
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spelling v2 62940 2023-03-16 Auctions of failed banks: an analysis of losing bidders c132216bf49e0544a968bb3919686327 0000-0002-0830-2316 Tim Zhou Tim Zhou true false 2023-03-16 BAF Between 2007 and 2013, the Federal Deposit Insurance Corporation (FDIC) used purchase and assumption (P&A) as a resolution method to auction 492 failed institutions to healthy banks. While existing studies reveal positive value effects on winning bidders of these auctions, this study finds that losing bidders experience negative abnormal stock returns. Furthermore, the losing bidders’ stockholders react negatively to a worsening market condition and an increased probability of failure. The returns, nevertheless, are related to the market power gains and distorted competitive condition post-auction. These results raise concerns that this type of intervention potentially gives rise to anticompetitive behavior among participating banks of FDIC auctions. Journal Article Review of Quantitative Finance and Accounting 61 Springer Nature 1573-7179 FDIC, Banks, Resolution, Auction 0 0 0 0001-01-01 10.1007/s11156-023-01146-3 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University SU Library paid the OA fee (TA Institutional Deal) Swansea University 2023-07-11T15:06:04.0105619 2023-03-16T12:56:14.6364155 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Tim Zhou 0000-0002-0830-2316 1 62940__27036__64a845b7fdf44fc489d60cef7740e06a.pdf 62940.VOR.pdf 2023-04-13T14:54:42.3001858 Output 767078 application/pdf Version of Record true Distributed under the terms of a Creative Commons Attribution 4.0 License. true eng https://creativecommons.org/licenses/by/4.0/
title Auctions of failed banks: an analysis of losing bidders
spellingShingle Auctions of failed banks: an analysis of losing bidders
Tim Zhou
title_short Auctions of failed banks: an analysis of losing bidders
title_full Auctions of failed banks: an analysis of losing bidders
title_fullStr Auctions of failed banks: an analysis of losing bidders
title_full_unstemmed Auctions of failed banks: an analysis of losing bidders
title_sort Auctions of failed banks: an analysis of losing bidders
author_id_str_mv c132216bf49e0544a968bb3919686327
author_id_fullname_str_mv c132216bf49e0544a968bb3919686327_***_Tim Zhou
author Tim Zhou
author2 Tim Zhou
format Journal article
container_title Review of Quantitative Finance and Accounting
container_volume 61
institution Swansea University
issn 1573-7179
doi_str_mv 10.1007/s11156-023-01146-3
publisher Springer Nature
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
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description Between 2007 and 2013, the Federal Deposit Insurance Corporation (FDIC) used purchase and assumption (P&A) as a resolution method to auction 492 failed institutions to healthy banks. While existing studies reveal positive value effects on winning bidders of these auctions, this study finds that losing bidders experience negative abnormal stock returns. Furthermore, the losing bidders’ stockholders react negatively to a worsening market condition and an increased probability of failure. The returns, nevertheless, are related to the market power gains and distorted competitive condition post-auction. These results raise concerns that this type of intervention potentially gives rise to anticompetitive behavior among participating banks of FDIC auctions.
published_date 0001-01-01T15:06:00Z
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score 11.021648

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