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Evaluating the German Bank Merger Wave

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  • M. Koetter

Abstract

German banks experienced a merger wave throughout the 1990’s. However,the success of bank mergers remains a continuous matter of debate.In this paper we suggest a taxonomy as how to evaluate post-merger performanceon the basis of cost efficiency (CE). We categorise mergers a successthat fulfill simultaneously two criteria. First, merged institutes must exhibitCE levels above the average of non-merging banks. Second, banks mustexhibit CE changes between merger and evaluation year above efficiencychanges of non-merging banks. We employ this taxonomy to characterise(successful) mergers in terms of various key-performance and structural indicatorsand investigate the implications for four prominent policy issuesparticular to German banking. Our main conclusions are threefold. First,roughly every second merger is a success. Second, the margin of success isnarrow, as the CE difference amounts to approximately 1 percentage point.Third, it takes around seven years after a transaction until maximum meanCE differentials materialise.

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  • M. Koetter, 2005. "Evaluating the German Bank Merger Wave," Working Papers 05-16, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:0516
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    Cited by:

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    2. Spandau, Johannes, 2010. "Fusionen im genossenschaftlichen FinanzVerbund: Eine erfolgreiche Strategie?," Arbeitspapiere 92, University of Münster, Institute for Cooperatives.
    3. Brämer, Patrick & Gischer, Horst & Richter, Toni & Weiß, Mirko, 2013. "Competition in banks’ lending business and its interference with ECB monetary policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 144-162.
    4. Marsch, Katharina & Schmieder, Christian & Forster-van Aerssen, Katrin, 2007. "Banking consolidation and small businessfinance: empirical evidence for Germany," Discussion Paper Series 2: Banking and Financial Studies 2007,09, Deutsche Bundesbank.
    5. Horst Gischer & Toni Richter, 2014. "Produktivitätsmessung von Banken: die Cost Income Ratio – ein belastbares Performancemaß?," FEMM Working Papers 140008, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    6. Adrian R. Gourlay & Geetha Ravishankar & Tom Weyman-Jones, 2006. "Non-Parametric Analysis of Efficiency Gains from Bank Mergers in India," Discussion Paper Series 2006_18, Department of Economics, Loughborough University, revised Oct 2006.
    7. Behr, Andreas & Heid, Frank, 2011. "The success of bank mergers revisited. An assessment based on a matching strategy," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 117-135, January.
    8. Spandau, Johannes, 2011. "Interne Prozessoptimierung und Auslagerung in der genossenschaftlichen FinanzGruppe: Erste Ergebnisse einer empirischen Erhebung," Arbeitspapiere 118, University of Münster, Institute for Cooperatives.
    9. Christian Schmieder & Katharina Marsch & Katrin Forster-van Aerssen, 2010. "Does banking consolidation worsen firms’ access to credit? Evidence from the German economy," Small Business Economics, Springer, vol. 35(4), pages 449-465, November.

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    More about this item

    Keywords

    Bank mergers; cost efficiency;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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