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

Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston

Contents:

Author Info

  • Charles W. Calomiris
  • Thanavut Pornrojnangkool

Abstract

The merger of Fleet and BankBoston in September 1999 resulted in a regional New England lending market in which only one large, universal bank remained. We explore the extent to which that merger resulted in monopoly rents for the combined entity in some niches within the regional loan market. For small- and medium-sized middle-market borrowers, prior to the merger, Fleet and BankBoston charged unusually low loan interest rates, reflecting their ability to realize economies of scope and scale. After the merger, those cost savings were no longer passed on to medium-sized middle-market borrowers, which resulted in an increase in the average interest rate credit spreads to those borrowers of roughly one percent. Small-sized middle-market borrowers (which continued to enjoy the advantage of loan market competition from remaining small banks) maintained their low spreads. Our results suggest that it may be desirable for regulators to consider the concentration in lending markets in addition to deposit markets when evaluating mergers and structuring appropriate divestiture requirements.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w11351.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11351.

as in new window
Length:
Date of creation: May 2005
Date of revision:
Handle: RePEc:nbr:nberwo:11351

Note: IO
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Nicola Cetorelli, 2002. "Entry and competition in highly concentrated banking markets," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q IV, pages 18-27.
  2. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  3. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 3-37, March.
  4. Mark J. Flannery, . "The Social Costs of Unit Banking Restrictions," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 15-82, Wharton School Rodney L. White Center for Financial Research.
  5. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
  6. Hans Degryse & Steven Ongena, 2002. "Distance, Lending Relationships, and Competition," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 80, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  7. Beim, D-O, 1996. "The Prime Premium : Is Relationship Banking Too Costly for Some?," Papers 96-22, Columbia - Graduate School of Business.
  8. Nicola Cetorelli, 2001. "Competition among banks: good or bad?," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q II, pages 38-48.
  9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  10. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  11. R. Glenn Hubbard & Darius Palia, 1994. "Executive Pay and Performance: Evidence from the U.S. Banking Industry," NBER Working Papers 4704, National Bureau of Economic Research, Inc.
  12. Hans Degryse & Steven Ongena, 2002. "Distance and competition," Proceedings, Federal Reserve Bank of Chicago 833, Federal Reserve Bank of Chicago.
  13. Douglas D. Evanoff & Diana L. Fortier, 1987. "Reevaluation of the structure-conduct-performance paradigm in banking," Staff Memoranda, Federal Reserve Bank of Chicago 87-9, Federal Reserve Bank of Chicago.
  14. Jith Jayaratne & Philip E. Strahan, 1996. "Entry restrictions, industry evolution and dynamic efficiency: evidence from commercial banking," Research Paper, Federal Reserve Bank of New York 9630, Federal Reserve Bank of New York.
  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 261-94, April.
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:
  1. Charles Calomiris & Thanavut Pornrojnangkool, 2009. "Relationship Banking and the Pricing of Financial Services," Journal of Financial Services Research, Springer, Springer, vol. 35(3), pages 189-224, June.
  2. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, Springer, vol. 36(2), pages 87-110, December.
  3. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.

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:nbr:nberwo:11351. 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: ().

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.