Advanced Search
MyIDEAS: Login

Why German banks should merge

Contents:

Author Info

  • Peiyi Yu
  • Werner Neus
  • Bac Van Luu
  • Sean Dodd
Registered author(s):

    Abstract

    Purpose – The paper aims to investigate whether the wave of mergers observed in other European countries is suitable for the German banking industry. Design/methodology/approach – This question is approached by studying the relationship between market structure and profit (the so-called profit-structure relationship) in the German banking industry using the model suggested by Berger. By extending his econometric model to include portfolio and capital risk and using German banks' financial data, the authors are able to test simultaneously for three competing theories of the profit-structure relationship. Findings – It is found that including portfolio risk significantly improves the fit of the estimated profit-structure relationship. In addition, it is found that scale economies are present in German banking and that the so-called structural conduct – performance hypothesis is accepted. Owing to the acceptance of this hypothesis, conclude it is that mergers are likely to boost German banks' profitability but possibly at the expense of lower consumer welfare. Research limitations/implications – The research methodology employed is unable to weigh the potential benefits of higher financial sector profitability and stability against the possible detrimental impact on consumer Originality/value – The value of the paper is to provide a robust estimate of scale economies and a reliable test of the profit-structure relationship in German banking based on recent data. It should be of particular value to bank managers, seeking to increase their institution's profitability by way of merger and to the regulator of the financial industry.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=56B6475998888EAEB8221ABF859B8211?contentType=Article&contentId=1611018
    Download Restriction: Cannot be freely downloaded

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Studies in Economics and Finance.

    Volume (Year): 24 (2007)
    Issue (Month): 2 (June)
    Pages: 140-155

    as in new window
    Handle: RePEc:eme:sefpps:v:24:y:2007:i:2:p:140-155

    Contact details of provider:
    Web page: http://www.emeraldinsight.com

    Order Information:
    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
    Email:
    Web: http://www.emeraldinsight.com/sef.htm

    Related research

    Keywords: Acquisitions and mergers; Banking; Germany; Profit;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Reddy, Kotapati Srinivasa & Nangia, Vinay Kumar & Agrawal, Rajat, 2013. "Indian economic-policy reforms, bank mergers, and lawful proposals: The ex-ante and ex-post ‘lookup’," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 601-622.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:24:y:2007:i:2:p:140-155. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.