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Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits

Author

Listed:
  • Dario Focarelli

    (Bank of Italy, Economic Research Department)

  • Fabio Panetta

    () (Bank of Italy, Economic Research Department)

Abstract

The general conclusion of the empirical literature is that in-market consolidation generates adverse price changes, harming consumers. Previous studies, however, look only at the short-run pricing impact of consolidation, ignoring all effects that take longer to materialize. Using a database that includes detailed information on the deposit rates of individual banks in local markets for different categories of depositors, we investigate the long-run price effects of M&As for the first time. We find strong evidence that, although consolidation does generate adverse price changes, these are temporary. In the long run efficiency gains dominate over the market power effect, leading to more favorable prices for consumers.

Suggested Citation

  • Dario Focarelli & Fabio Panetta, 2002. "Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits," Temi di discussione (Economic working papers) 448, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_448_02
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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2002/2002-0448/tema_448_02.pdf
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    References listed on IDEAS

    as
    1. Stefano Neri, 2001. "Assessing the effects of monetary and fiscal policy," Temi di discussione (Economic working papers) 425, Bank of Italy, Economic Research and International Relations Area.
    2. Riccardo De Bonis & Annalisa Ferrando, 2000. "The Italian Banking Structure in the 1990s: Testing the Multimarket Contact Hypothesis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(2), pages 215-241, July.
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    Citations

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    Cited by:

    1. Fabio Panetta, 2003. "Evoluzione del sistema bancario e finanziamento dell�economia nel Mezzogiorno," Temi di discussione (Economic working papers) 467, Bank of Italy, Economic Research and International Relations Area.
    2. Luca Casolaro & Dario Focarelli & Alberto F. Pozzolo, 2003. "The pricing effect of certification on bank loans: evidence from the syndicated credit market," Proceedings 864, Federal Reserve Bank of Chicago.
    3. Dean F. Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Finance and Economics Discussion Series 2002-47, Board of Governors of the Federal Reserve System (U.S.).
    4. Emilia Bonaccorsi di Patti & Giorgio Gobbi, 2003. "The effects of bank mergers on credit availability: evidence from corporate data," Temi di discussione (Economic working papers) 479, Bank of Italy, Economic Research and International Relations Area.
    5. Dean Amel & Colleen Barnes & Fabio Panetta & Carmelo Salleo, 2002. "Consolidation and efficiency in the financial sector: a review of the international evidence," Temi di discussione (Economic working papers) 464, Bank of Italy, Economic Research and International Relations Area.
    6. Christoph Walkner & Jean-Pierre Raes, 2005. "Integration and consolidation in EU banking - an unfinished business," European Economy - Economic Papers 2008 - 2015 226, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Coccorese, Paolo, 2009. "Market power in local banking monopolies," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1196-1210, July.

    More about this item

    Keywords

    mergers; efficiency; market power; bank mergers;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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