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Counterfactual analysis of bank mergers

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  • Pedro Barros
  • Diana Bonfim
  • Moshe Kim
  • Nuno Martins

Abstract

We introduce a counterfactual analysis of banks mergers, combining the pre-merger equilibrium setting with post-merger environmental characteristics, while accounting for endogenously propagated changes in market structure. Using this procedure we are able to estimate the effects on loan flows and interest rates that would have been observed if the pre-merger equilibrium was not altered. Results are obtained for firms, households, and banks inside and outside the merging circles separately. We find that mergers increased firms’ access to credit, but had an opposite effect on households and led to a widespread decrease in interest rates. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Pedro Barros & Diana Bonfim & Moshe Kim & Nuno Martins, 2014. "Counterfactual analysis of bank mergers," Empirical Economics, Springer, vol. 46(1), pages 361-391, February.
    • Handle: RePEc:spr:empeco:v:46:y:2014:i:1:p:361-391
    DOI: 10.1007/s00181-012-0666-1
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    More about this item

    Keywords

    Banks; Mergers; Counterfactual; Competition; G21; G34; L10;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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