Abstract
The landscape of the U.S. banking industry is changing rapidly. A major merger wave has enveloped the industry over the past two decades. Over 10,000 bank mergers occurred between 1980 and 1999, reducing the number of commercial banks from 14,364 at year-end 1979 to 8,580 at year-end 1999.1
This paper is drawn from Kim (1997). We would like to thank William Geene, Kenji Kimura, Richard Sylla, David Tarr, Gregory Udell, and Paul Wachtel for useful comments.
Over 4,000 instances of entry also occurred during these two decades, which explains why the net decrease in the number of banks is smaller than the number of mergers. Also, during the wave of bank failures that occurred during the 1980s and early 1990s, there were a few outright closures and liquidations. See FDIC (1998, 1999) and White (2001).
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Aigner, Dennis, C.A.K. Lovell, and P. Schmidt, “Formulation and Estimation of Stochastic Frontier Production Function Models,” Journal of Econometrics, 86 (1977), pp. 21–37.
Akhavein, Jalal D., Allen N. Berger, and David B. Humphrey, “The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function,” Review of Industrial Organization, 12 (1997), pp. 95–139.
Battese, G.E., and G.S. Corra, “Estimation of a Production Frontier Model with Application to the Pastoral Zone of Eastern Australia,” Australian Journal of Agricultural Economics, 21 (1977), pp. 169–179.
Berger, Allen N., “‘Distribution-Free’ Estimates of Efficiency in the U.S. Banking Industry and Tests of the Standard Distributional Assumptions,” Journal of Productivity Analysis, (1993), pp. 261–292.
Berger, Allen N., Rebecca S. Demsetz, and Philip E. Strahan, “The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future,” Journal of Banking & Finance, 23 (February 1999), pp. 135–194.
Berger, Allen N. and David B. Humphrey, “The Dominance of Inefficiencies over Scale and Product Mix Economies in Banking,” Journal of Monetary Economics, 20 (August 1991), pp. 501–520.
Berger, Allen N. and David B. Humphrey, “Megamergers in Banking and the Use of Cost Efficiency as an Antitrust Defense,” Antitrust Bulletin, 37 (Fall 1992), pp. 541–600.
DeYoung, Robert, “Determinants of Cost Efficiencies in Bank Mergers,” Office of the Comptroller of the Currency, Economic and Policy Analysis Working Paper 93-1, August 1991.
Evanoff, Douglas and P. Israelevich, “Scale Elasticity and Efficiency for U.S. Banks, Issues in Financial Regulation. Chicago: Federal Reserve Bank of Chicago, 1991.
Federal Deposit Insurance Corporation, History of the Eighties: Lessons for the Future. Washington, D.C.: FDIC, 1997.
Federal Deposit Insurance Corporation, Managing the Crisis: The FDIC and RTC Experience. Washington, D.C.: FDIC, 1998.
Greene, William H., “On the Estimation of a Flexible Frontier Production Model,” Journal of Econometrics, 13 (1980), pp. 101–115.
Greene, William H., Econometric Analysis, 2nd edn. New York: Macmillan, 1993.
Hughes, Joseph P., and Loretta J. Mester, “A Quality and Risk-Adjusted Cost Function for Banks: Evidence on the ‘Too-Big-To-Fail’ Doctrine,” Journal of Productivity Analysis, 4 (1993), pp. 293–315.
Jondrow, J., C.A. Lovell, I.S. Materov, and P. Schmidt, “On Estimation of Technical Inefficiency in the Stochastic Frontier Production Function Model,” Journal of Econometrics, 19 (1982), pp. 233–238.
Kim, Woojin, “The Impact of Mergers on Bank Performance,” Ph.D. Dissertation, Stern School of Business, New York University, 1997.
Rhoades, Stephen A., “Efficiency Effects of Horizontal (In-Market) Bank Mergers,” Journal of Banking and Finance, 17 (1993), pp. 411–422.
Sealey, C., and J. Lindley, “Inputs, Outputs, and a Theory of Production and Cost at Depository Financial Institutions,” Journal of Finance, 32 (1977), pp. 1251–1266.
White, Lawrence J., “Bank Regulation in the United States: Understanding the Lessons of the 1980s and 1990s,” Japan and the World Economy, 2001 forthcoming.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2001 Springer Science+Business Media New York
About this chapter
Cite this chapter
Kim, W., White, L.J. (2001). The Impact of Mergers on U.S. Bank Performance. In: Negishi, T., Ramachandran, R.V., Mino, K. (eds) Economic Theory, Dynamics and Markets. Research Monographs in Japan-U.S. Business & Economics, vol 5. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-1677-4_20
Download citation
DOI: https://doi.org/10.1007/978-1-4615-1677-4_20
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-5673-8
Online ISBN: 978-1-4615-1677-4
eBook Packages: Springer Book Archive