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Italian Mutual Banks: Performance, Efficiency and Mergers and Acquisitions

Editor

Listed:
  • Morten Balling

Author

Listed:
  • Juan Sergio Lopez
  • Alessandra Appenini
  • Stefania P.S. Rossi
  • Roberto Di Salvo
  • Maria Carmela Mazzilis
  • Andrea Guidi

Abstract

1) Are Italian mutual banks efficient? Evidence from two different cost frontier techniques, by Juan Sergio Lopez, Alessandra Appenini, and Stefania P.S. Rossi. The aim of the first paper is to analyze the efficiency of co-operative banks in Italy. The increasing competition induced by the ongoing process of liberalization in Europe has been affecting also these small financial institutions that used to operate in a more protected environment. Based on a panel of about 450 banks covering the period 1995-99, two different techniques were employed: non-parametric frontier analysis, and parametric frontier analysis. By means of this analysis it is possible to compare the results obtained using these two methodologies and analyze the determinants of bank inefficiency 2) Mergers and acquisitions between mutual banks in Italy: an analysis of the effects on performance and productive efficiency, by Roberto Di Salvo, Maria Carmela Mazzilis, and Andrea Guidi. The second paper is aimed at testing the hypothesis that the M&A wave over the past ten years has increased the level of efficiency of co-operative credit banks (CCBs), both in terms of overall performance and productive efficiency. The logical development is hinged on two steps: 1) an explorative analysis which is based on the observation of balance sheet ratios by quantiles, 2) a DEA application for estimating productive efficiency scores. The analysis refers to 94 CCBs which have been involved in M&As over the period 1995-98 and is carried out on both merged and non-merged banks, either before concentration or in the subsequent years. The explorative analysis mainly shows a higher level of fee-based income for merged banks, which is consistent with the hypothesis that concentration strategies enhance diversification. It also detects some degree of cost reduction just after merging. The DEA application models (CRS and VRS) tends to confirm the results of the previous analysis and estimates higher efficiency for merged banks, a lower efficiency degree for pre-merger banks, and a significant degree of scale econonomies..

Suggested Citation

  • Juan Sergio Lopez & Alessandra Appenini & Stefania P.S. Rossi & Roberto Di Salvo & Maria Carmela Mazzilis & Andrea Guidi, 2002. "Italian Mutual Banks: Performance, Efficiency and Mergers and Acquisitions," SUERF Studies, SUERF - The European Money and Finance Forum, number 15 edited by Morten Balling, May.
    • Handle: RePEc:erf:erfstu:15
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    References listed on IDEAS

    as
    1. Miguel Sebastian & Carmen Hernansanz, 2000. "The Spanish Banks' Strategy in Latin America," SUERF Studies, SUERF - The European Money and Finance Forum, number 9 edited by Morten Balling, May.
    2. Steven Pilloff, 1994. "Performance Changes and Shareholder Wealth Creation Associated with Mergers of Publicly Traded Banking Institutions," Center for Financial Institutions Working Papers 94-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Richard Dale & Franco Bruni & Christian de Boissieu, 2000. "Strengthening Financial Infrastructure - Deposit Insurance and Lending of Last Resort," SUERF Studies, SUERF - The European Money and Finance Forum, number 7 edited by Morten Balling, May.
    4. Cem Karacadag & Michael W. Taylor, 2000. "The New Capital Adequacy Framework - Institutional Constraints and Incentive Structures," SUERF Studies, SUERF - The European Money and Finance Forum, number 8 edited by Morten Balling, May.
    5. Carmen Hernansanz & Miguel Sebastian, 2000. "The Spanish Banks strategy in Latin America," Working Papers 0003, BBVA Bank, Economic Research Department.
    6. Mr. Cem Karacadag & Mr. Michael W Taylor, 2000. "The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures," IMF Working Papers 2000/093, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bank efficiency; cooperative banks; mutual banks; DEA; stochastic cost frontier; banks; mergers;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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