Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bank mergers, competition, and liquidity

Contents:

Author Info

  • Elena Carletti
  • Philipp Hartman
  • Giancarlo Spagnolo

Abstract

We model the impact of bank mergers on loan competition, reserve holdings, and aggregate liquidity. A merger changes the distribution of liquidity shocks and creates an internal money market, leading to financial cost efficiencies and more precise estimates of liquidity needs. The merged banks may increase their reserve holdings through an internalization effect or decrease them because of a diversification effect. The merger also affects loan market competition, which in turn modifies the distribution of bank sizes and aggregate liquidity needs. Mergers among large banks tend to increase aggregate liquidity needs and thus the public provision of liquidity through monetary operations of the central bank. Copyright 2007 The Ohio State University.

(This abstract was borrowed from another version of this item.)

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Proceedings with number 854.

as in new window
Length: 89-99
Date of creation: 2003
Date of revision:
Publication status: Published in Conference on Bank Structure and Competition (2003 : 39th) ; Corporate governance : implications for financial services firm
Handle: RePEc:fip:fedhpr:854

Contact details of provider:
Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Phone: 312/322-5111
Fax: 312/322-5515
Email:
Web page: http://www.chicagofed.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm

Related research

Keywords: Bank mergers ; Bank competition ; Bank liquidity;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Philipp Hartmann & Elena Carletti, 2002. "Competition and Stability: What's Special about Banking?," FMG Special Papers, Financial Markets Group sp140, Financial Markets Group.
  2. John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, American Finance Association, vol. 57(2), pages 695-720, 04.
  3. Joseph P. Hughes & Loretta J. Mester & Choon-Geol Moon, 2000. "Are scale economies in banking elusive or illusive? Evidence obtained by incorporating capital structure and risk-taking into models of bank production," Working Papers 00-4, Federal Reserve Bank of Philadelphia.
  4. Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
  5. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 219-27, March.
  6. Joseph P. Hughes & William Lang & Loretta J. Mester & Choon-Geol Moon, 1996. "Efficient banking under interstate branching," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1045-1075.
  7. Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
  8. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 1-40, February.
  9. David C. Wheelock & Paul W. Wilson, 1997. "New evidence on returns to scale and product mix among U.S. commercial banks," Working Papers, Federal Reserve Bank of St. Louis 1997-003, Federal Reserve Bank of St. Louis.
  10. X. Freixas & B. Parigi & J-C. Rochet, 2000. "Systemic Risk, Interbank Relations and Liquidity Provision by theCentral Bank," DNB Staff Reports (discontinued), Netherlands Central Bank 47, Netherlands Central Bank.
  11. Allen N. Berger & David B. Humphrey, 1990. "The dominance of inefficiencies over scale and product mix economies in banking," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 107, Board of Governors of the Federal Reserve System (U.S.).
  12. Murillo Campello, 2002. "Internal Capital Markets in Financial Conglomerates: Evidence from Small Bank Responses to Monetary Policy," Journal of Finance, American Finance Association, American Finance Association, vol. 57(6), pages 2773-2805, December.
  13. Heller, Daniel & Lengwiler, Yvan, 2003. "Payment obligations, reserve requirements, and the demand for central bank balances," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(2), pages 419-432, March.
  14. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 147-165, March.
  15. Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, Elsevier, vol. 33(2-3), pages 294-301, March.
  16. Matutes, Carmen & Vives, Xavier, 1995. "Imperfect Competition, Risk Taking, and Regulation in Banking," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1177, C.E.P.R. Discussion Papers.
  17. David S. Scharfstein & Jeremy C. Stein, 2000. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," Journal of Finance, American Finance Association, American Finance Association, vol. 55(6), pages 2537-2564, December.
  18. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, American Finance Association, vol. 45(4), pages 1069-87, September.
  19. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  20. Jean Dermine, 2000. "Bank Mergers in Europe: The Public Policy Issues," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(3), pages 409-425, 09.
  21. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  22. Raghuram Rajan & Henri Servaes & Luigi Zingales, . "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 357, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  23. Gertner, Robert H & Scharfstein, David S & Stein, Jeremy C, 1994. "Internal versus External Capital Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 1211-30, November.
  24. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The Microstructure of the Euro Money Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3081, C.E.P.R. Discussion Papers.
  25. Winton Andrew, 1995. "Delegated Monitoring and Bank Structure in a Finite Economy," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 4(2), pages 158-187, April.
  26. Douglas W. Diamond, . "Liquidity, Banks and Markets," CRSP working papers 326, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  27. Anil Kashyap & Raghuram Rajan & Jeremy S. Stein, 1998. "Banks as liquidity providers: an explanation for the co-existence of lending and deposit-taking," Proceedings, Federal Reserve Bank of Chicago 582, Federal Reserve Bank of Chicago.
  28. Seth Carpenter & Selva Demiralp, 2004. "The liquidity effect in the federal funds market: evidence from daily open market operations," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-61, Board of Governors of the Federal Reserve System (U.S.).
  29. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  30. Rhoades, Stephen A., 1998. "The efficiency effects of bank mergers: An overview of case studies of nine mergers," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(3), pages 273-291, March.
  31. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
  32. Allen, Franklin & Gale, Douglas, 1998. "Financial Contagion," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-33, C.V. Starr Center for Applied Economics, New York University.
  33. Perotti, Enrico C & Suarez, Javier, 2001. "Last Bank Standing: What Do I Gain if You Fail?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2933, C.E.P.R. Discussion Papers.
  34. Berger, Allen N. & Hanweck, Gerald A. & Humphrey, David B., 1987. "Competitive viability in banking : Scale, scope, and product mix economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 20(3), pages 501-520, December.
  35. Yanelle, Marie-Odile, 1997. "Banking Competition and Market Efficiency," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(2), pages 215-39, April.
  36. John H. Boyd & Stanley L. Graham, 1996. "Consolidation in U.S. banking: implications for efficiency and risk," Working Papers, Federal Reserve Bank of Minneapolis 572, Federal Reserve Bank of Minneapolis.
  37. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, Elsevier, vol. 23(2-4), pages 135-194, February.
  38. Hannan, Timothy H., 1991. "Bank commercial loan markets and the role of market structure: evidence from surveys of commercial lending," Journal of Banking & Finance, Elsevier, Elsevier, vol. 15(1), pages 133-149, February.
  39. Bhattacharya, Sudipto & Fulghieri, Paolo, 1994. "Uncertain liquidity and interbank contracting," Economics Letters, Elsevier, Elsevier, vol. 44(3), pages 287-294.
  40. Houston, Joel & James, Christopher & Marcus, David, 1997. "Capital market frictions and the role of internal capital markets in banking," Journal of Financial Economics, Elsevier, Elsevier, vol. 46(2), pages 135-164, November.
  41. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, American Finance Association, vol. 47(4), pages 1367-400, September.
  42. Winton, Andrew, 1997. "Competition among Financial Intermediaries When Diversification Matters," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 6(4), pages 307-346, October.
Full references (including those not matched with items on IDEAS)

Citations

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

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

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:fip:fedhpr:854. 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: (Bernie Flores).

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.