A test of the impact of mergers on bank competition

Cerasi, Vittoria, Chizzolini, Barbara and Ivaldi, Marc (2019) A test of the impact of mergers on bank competition. Economic Notes. (In Press)

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Abstract

We propose a new test to evaluate the impact of horizontal mergers on competition in the banking industry. The test is designed to be applied ex ante to potential mergers while being parsimonious in terms of data, as it only uses
information on branches in local markets. The test is a counterfactual exercise based on a two-stage model where banks compete in branching and interest rates and requires comparing the estimated degree of competition in the status quo, where branching networks by banks are those actually observed, with a counterfactual scenario, where the branching network of the new entity is the sum of the branches of the banks involved in the horizontal merger. The statistical difference between the two estimated measures of competition quantifies the impact of the merger.We apply our test to French and Italian mergers.

Item Type: Article
Language: English
Date: 2019
Refereed: Yes
Uncontrolled Keywords: banking industry, competition and market structure, merger policy
JEL codes: G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
L13 - Oligopoly and Other Imperfect Markets
L59 - Other
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 03 May 2019 07:33
Last Modified: 03 May 2019 07:33
OAI ID: oai:tse-fr.eu:122944
URI: http://publications.ut-capitole.fr/id/eprint/32442

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