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Bank Mergers in Chile: A Pro?t Efficiency Assessment

Author

Listed:
  • Yolanda Portilla

    () (Facultad de Economía y Empresa, Universidad Diego Portales)

  • Gino Loyola

    () (Facultad de Economía y Negocios, Universidad de Chile)

  • Jose Miguel Sanchez

    () (Insituto de Economia, Pontificia Universidad Catolica de Chile)

Abstract

During the last two decades, the Chilean banking industry has experienced a high concentration due to several mergers between its institutions. Among the reasons ar- gued for these consolidations, a potential for substantial gains in e¢ ciency is claimed. Recent studies suggest that the Chilean banking system indeed exhibits such a po- tential for the so-called X-efficiency, rather than for the traditional scale and scope economies. The aim of this study is to empirically evaluate the e¤ects of the bank mergers materialized in Chile during the last 20 years on this class of efficiency. To this end, we apply a methodology based on the frontier pro?t function approach which allows us to compare previous and posterior scenarios to the merger. Our results show, in general, a positive e¤ect of bank mergers on e¢ ciency standards. This suggests that the reduction of ine¢ ciencies X should be an important element to consider when evaluating these processes from both a private and an antitrust policy perspective.

Suggested Citation

  • Yolanda Portilla & Gino Loyola & Jose Miguel Sanchez, 2011. "Bank Mergers in Chile: A Pro?t Efficiency Assessment," Working Papers 33, Facultad de Economía y Empresa, Universidad Diego Portales.
  • Handle: RePEc:ptl:wpaper:33
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