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Why Do Banks Merge?

Author

Listed:
  • Focarelli, Dario
  • Panetta, Fabio
  • Salleo, Carmelo

Abstract

The banking industry is consolidating at an accelerating pace, yet no conclusive results have emerged on the benefits of mergers and acquisitions. In order to investigate the motives and results of each type of deal we consider separately acquisitions (that is, the purchase of the majority of voting shares) and mergers, using Italian data. Mergers seek to improve income from services, but the increase is offset by higher staff costs; return on equity improves because of a decrease in capital. Acquisitions aim to restructure the loan portfolio of the acquired bank; improved lending policies result in higher profits.

Suggested Citation

  • Focarelli, Dario & Panetta, Fabio & Salleo, Carmelo, 2002. "Why Do Banks Merge?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1047-1066, November.
  • Handle: RePEc:mcb:jmoncb:v:34:y:2002:i:4:p:1047-66
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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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