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Endogenous Bank Mergers and Their Impact on Banking Performance

Author

Listed:
  • Peter Egger

    (WIFO)

  • Franz R. Hahn

    (WIFO)

Abstract

This paper examines the effect of mergers on the performance of banks. We use a unique and exhaustive panel data set of mergers of Austrian banks covering the period from 1996 to 2002. A probit selection equation is formulated to explain the adoption of a merger strategy. We use various matching techniques to estimate the treatment effects of bank mergers on the banks' performance. The analysis provides evidence in favour of the view that there are longer lasting positive effects on bank performance, especially, in terms of improved cost efficiency. The findings also suggest that pre-merger effects are likely to occur in terms of higher cost efficiency immediately before the establishment of the merger. Finally, smaller banks involved in merger activities are more likely to enjoy cost-efficiency gains earlier than larger banks.

Suggested Citation

  • Peter Egger & Franz R. Hahn, 2006. "Endogenous Bank Mergers and Their Impact on Banking Performance," WIFO Working Papers 271, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2006:i:271
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    File URL: https://www.wifo.ac.at/wwa/pubid/26354
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    References listed on IDEAS

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    3. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1996. "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Center for Financial Institutions Working Papers 96-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
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    5. Laetitia Lepetit & Stephanie Patry & Philippe Rous, 2004. "Diversification versus specialization: an event study of M&As in the European banking industry," Applied Financial Economics, Taylor & Francis Journals, vol. 14(9), pages 663-669.
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    Cited by:

    1. Klaus Gugler & Florian Szücs, 2013. "Merger Externalities in Oligopolistic Markets," Discussion Papers of DIW Berlin 1321, DIW Berlin, German Institute for Economic Research.
    2. Oberhofer, Harald & Stöckl, Matthias & Winner, Hannes, 2012. "The wage premium of globalization: Evidence from European mergers and acquisitions," Economics Discussion Papers 2012-6, Kiel Institute for the World Economy (IfW).

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