This paper examines the efficiency consequences of bank mergers and acquisitions with particular reference to the 'four pillars' policy preventing mergers among the four major banks. Using data envelopment analysis, the technical efficiencies of banks operating in Australia over the period from 1983 to 2001 are estimated. A second-stage regression is used to evaluate ex-post efficiency performance of banks involved in mergers and acquisitions. The empirical results demonstrate that for the time being mergers among the four major banks may result in much poorer efficiency performance in the merging banks and the banking sector. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.
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