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Consolidation and efficiency in the financial sector: a review of the international evidence

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  • Dean Amel

    (Federal Reserve Board, Washington DC)

  • Colleen Barnes

    (Department of Finance, Ottawa, Canada)

  • Fabio Panetta

    ()
    (Bank of Italy, Economic Research Department)

  • Carmelo Salleo

    (Bank of Italy, Economic Research Department)

Registered author(s):

    Abstract

    In response to fundamental changes in regulation and technology, the financial industry around the world is undergoing an unprecedented wave of consolidation. A growing body of empirical literature has attempted to measure the efficiency gains from M&As; however there is little sense of how the results might depend on the country, industry and time period analysed. In this paper we review critically works that cover the main sectors of the financial industry (commercial and investment banks, insurance and asset management companies) in the major industrialized countries over the last twenty years, searching for common patterns that transcend national and sectoral peculiarities. We find that consolidation in the financial sector is beneficial up to a relatively small size in order to reap economies of scale, but there is little evidence that mergers yield economies of scope or gains in managerial efficiency.

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    Bibliographic Info

    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 464.

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    Date of creation: Dec 2002
    Date of revision:
    Handle: RePEc:bdi:wptemi:td_464_02

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    Web page: http://www.bancaditalia.it
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    Keywords: mergers; efficiency; bank mergers;

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    References

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    Cited by:
    1. Sylvia Kaufmann & Maria Teresa Valderrama, 2004. "The Role of Bank Lending in Market-Based and Bank-Based Financial Systems," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 88–97.
    2. Gianni De Nicoló & M. G. Zephirin & Philip F. Bartholomew & Jahanara Zaman, 2003. "Bank Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk," IMF Working Papers 03/158, International Monetary Fund.
    3. Mikel Larreina, 2008. "Financial centres in peripheral regions: the effect of the financial services industry on regional economy - the case of the Scottish Financial cluster," CRIEFF Discussion Papers 0805, Centre for Research into Industry, Enterprise, Finance and the Firm.
    4. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
    5. Miguel Ángel Morales Mosquera, . "Concentración y estabilidad financiero: el caso del sistema bancario colombiano," Temas de Estabilidad Financiera 058, Banco de la Republica de Colombia.
    6. Luca Casolaro & Giorgio Gobbi, 2004. "Information technology and productivity changes in the Italian banking industry," Temi di discussione (Economic working papers) 489, Bank of Italy, Economic Research and International Relations Area.
    7. Christoph Walkner & Jean-Pierre Raes, 2005. "Integration and consolidation in EU banking - an unfinished business," European Economy - Economic Papers 226, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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