Referee report Essay Example | Topics and Well Written Essays - 2500 words

Referee report - Essay Example The study found that M & As provides a positive impact on systemic risks for the transfer function estimation based on aggregate Z-score. Other evidence from the history and empirical findings favoured the efficiency hypothesis as opposed to the hypothesis of the imminent failure. The authors assessed how Banking system over relying on merger guidelines based on Herfndahl-Hirshman Index might curb the possibility of increasing risks associated with M & As. The understanding of risks and stability for banks undergoing merger and acquisition has drawn immense attention hence widely published in the banking empirical literature. The area of study is important for strategies in the banking sectors as well as the investors to devise methods that assess the possibilities of securing risks or attaining stability after merger and acquisition. Most of the empirical and theoretical framework was relevant with the exception of a few materials and concepts used by the author. However, I believe the area studied is very important. Therefore, I wish to illustrate and give my personal views as follows: 1. I am not sure whether the probabilistic model proposed and developed by the author as a mean of analysing the relationship between the systemic stability and the merger of banking system can provide the function it was proposed to offer. 2. The reason relates to the description of the model. The authors assert that the model uses a theoretical framework in establishing the differences between the imminent failure hypothesis and the efficiency hypothesis. One would wonder how they measured the levels of failure in the banks. Using financial distress, and bank failure as the indicator is relative and not objective. 3. Besides the model uses the assumption that when banks have low levels of probability for failure, they are likely to experience reduced systemic crises, and contagious bank runs, which were not substantiated appropriately as would be expected (Carlton and