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Economic Integration and Banking Mergers Strategies

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  • José García Solanes

    (Universidad de Murcia)

  • Diego Peñarrubia

    (Universidad de Murcia)

Abstract

In this work we develop a spatial model to explain local megers and acquisitions (M&As) in European retail banking systems as strategic reactions to changes in regulation and economic integration. We show that local banking concentration increases market power and contributes to build new barriers to entry. Local M&As yield positive social results in the first economic integration stages, but could damage welfare in more advenced stages in cases where they serve to safeguard price agreements in front of foreign competition. Our results seem to conform to experiences of most European banking markets during the last two decades.

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File URL: http://www.aeefi.com/RePEc/pdf/defi01-07.pdf
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Bibliographic Info

Paper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 01-07.

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Length: 27 pages
Date of creation: Jun 2001
Date of revision:
Handle: RePEc:aee:wpaper:0107

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  1. Damien NEVEN & Thomas VON UNGERN-STERNBERG, 1998. "The Competitive Impact of the UBS-SBC Merger," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9805, Université de Lausanne, Faculté des HEC, DEEP.
  2. Vives, Xavier, 1990. "Banking Competition and European Integration," CEPR Discussion Papers 373, C.E.P.R. Discussion Papers.
  3. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997. "The effects of megamergers on efficiency and prices: evidence from a bank profit function," Finance and Economics Discussion Series 1997-9, Board of Governors of the Federal Reserve System (U.S.).
  4. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
  5. Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
  6. Gual, Jordi, 1999. "Deregulation, Integration and Market Structure in European Banking," CEPR Discussion Papers 2288, C.E.P.R. Discussion Papers.
  7. Joseph P. Hughes & Loretta J. Mester, 1998. "Bank Capitalization And Cost: Evidence Of Scale Economies In Risk Management And Signaling," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 314-325, May.
  8. J.A. Bikker & J.M. Groeneveld, 1998. "Competition and Concentration in the EU Banking Industry," Research Series Supervision (discontinued) 8, Netherlands Central Bank, Directorate Supervision.
  9. Lloyd-Williams, D. M. & Molyneux, Phil & Thornton, John, 1994. "Market structure and performance in Spanish banking," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 433-443, May.
  10. Gual, Jordi, 1999. "Deregulation, Integration, and Market Structure in European Banking," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 372-396, December.
  11. Gual, Jordi, 1999. "Deregulation, integration and market structure in European banking," IESE Research Papers D/397, IESE Business School.
  12. Molyneux, Phil & Lloyd-Williams, D. M. & Thornton, John, 1994. "Competitive conditions in european banking," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 445-459, May.
  13. Davis, E. Philip & De Bandt, Olivier, 1999. "A cross-country comparison of market structures in European banking," Working Paper Series 0007, European Central Bank.
  14. Dietsch, Michel & Lozano-Vivas, Ana, 2000. "How the environment determines banking efficiency: A comparison between French and Spanish industries," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 985-1004, June.
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