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Endogenous bank mergers and their impact on banking performance: Some evidence from Austria


  • Egger, Peter
  • Hahn, Franz R.


This paper is aimed at examining the actual performance effects of horizontal mergers among companies. The view taken in this paper holds that evaluating actual mergers' efficiency effects be similar in spirit to estimating causal treatment effects. By applying the matching framework we use a methodology that, given a rich enough dataset, is capable of resolving a twofold problem of empirical merger analysis: the missing data and the selection problem. A high-quality panel dataset of more than 800 Austrian universal banks covering the period from 1996 to 2002 allows us to estimate a logit selection model based on recent developments in dynamic merger analysis to explain the adoption of a merger strategy, and to apply various matching techniques to cope with the missing data and self-selection problem linked to the estimation of merger effects. The analysis provides evidence in favor of the view that horizontal mergers exert positive effects on bank performance, especially, in terms of improved cost performance. The findings also suggest that pre-merger effects are likely to occur in terms of lower costs immediately before the establishment of the merger. Finally, smaller banks involved in merger activities are more likely to enjoy cost-performance gains earlier than larger banks.

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  • Egger, Peter & Hahn, Franz R., 2010. "Endogenous bank mergers and their impact on banking performance: Some evidence from Austria," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 155-166, March.
  • Handle: RePEc:eee:indorg:v:28:y:2010:i:2:p:155-166

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    References listed on IDEAS

    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
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    Cited by:

    1. Gugler, Klaus & Szücs, Florian, 2016. "Merger externalities in oligopolistic markets," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 230-254.
    2. Ralph Siebert, 2017. "Heterogeneous Merger Impacts on Competitive Outcomes," CESifo Working Paper Series 6607, CESifo Group Munich.
    3. Majumdar Sumit K., 2015. "Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment," Business and Politics, De Gruyter, vol. 17(2), pages 291-326, August.
    4. Franz R. Hahn & Werner Hölzl, 2012. "Effects of the New Capital Requirements of Basel III on the Financing of Small and Medium-sized Enterprises in Austria," Austrian Economic Quarterly, WIFO, vol. 17(3), pages 168-186, August.
    5. Harald Oberhofer & Matthias Stöckl & Hannes Winner, 2012. "The Wage Premium of Globalisation: Evidence from European Mergers and Acquisitions," WIFO Working Papers 416, WIFO.
    6. Harald Oberhofer, 2013. "Employment Effects of Acquisitions: Evidence from Acquired European Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(3), pages 345-363, May.
    7. Klaus Gugler & Florian Szücs, 2013. "Merger Externalities in Oligopolistic Markets," Discussion Papers of DIW Berlin 1321, DIW Berlin, German Institute for Economic Research.
    8. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2015. "The Location of Cross-Border Mergers & Acquisitions in the USA," CESifo Working Paper Series 5331, CESifo Group Munich.


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