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Mergers and Acquisitions in the Colombian Financial Sector (Impact on Efficiency 1990-2005)

Author

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  • Sergio Clavijo

    ()

  • Carlos I. Rojas
  • Camila Salamanca
  • Germán Montoya

Abstract

Colombia has witnessed a renewed interest in merging and acquiring financial institutions during 2003-2005. These have been “complementary mergers” that seek to exploit economies scale and scope. This process contrasts favorably with those mergers & acquisitions that occurred during the mid-1990s, which involved mainly “twin institutions” that lacked potential for gaining multiproduct efficiency. This document analyzes the need to remove some of the regulatory constraints that obstruct further exploitation of such economies of scale-scope and quantifies the “cost efficiencies” shown by the Colombian banking sector (1994-2005). At the aggregate level, we found (absolute) banking efficiency to be around 63%, a similar value to those found in related studies post-crisis. This implies that banks operating in Colombia have been able to recover their efficiency levels during postcrisis 2003-2005, except for mortgage institutions. We highlight regulatory barriers that could be removed to help the banking system move closer to the optimal production frontier.

Suggested Citation

  • Sergio Clavijo & Carlos I. Rojas & Camila Salamanca & Germán Montoya, 2006. "Mergers and Acquisitions in the Colombian Financial Sector (Impact on Efficiency 1990-2005)," INVESTIGACIÓN ECONÓMICA EN COLOMBIA 003206, FUNDACIÓN PONDO.
  • Handle: RePEc:col:000100:003206
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    Cited by:

    1. Sarmiento, Miguel & Galán, Jorge E., 2017. "The influence of risk-taking on bank efficiency: Evidence from Colombia," Emerging Markets Review, Elsevier, vol. 32(C), pages 52-73.
    2. Galán, Jorge E. & Veiga, Helena & Wiper, Michael P., 2015. "Dynamic effects in inefficiency: Evidence from the Colombian banking sector," European Journal of Operational Research, Elsevier, vol. 240(2), pages 562-571.

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    Keywords

    Financial Institutions; Mergers and Acquisitions;

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