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The efficiency effects of bank mergers and acquisition: A preliminary look at the 1990s data

  • Allen N. Berger
Part of the The New York University Salomon Center Series on Financial Markets and Institutions book series (SALO, volume 3)

Abstract

We estimate the cost, standard profit, and alternative profit efficiency effects of bank mergers of the 1990s. The data suggest that on average, bank mergers increase profit efficiency relative to other banks, but have little effect on cost efficiency. Efficiency gains are much more pronounced when the participating banks are relatively inefficient ex ante, consistent with an hypothesis that mergers may “wake up” inefficient management or are used as an excuse to implement unpleasant restructuring. The data suggest that part of the efficiency gains result from improved diversification of risks, which may allow consolidated banks to shift their output mixes from securities toward loans, raising expected revenues.

Keywords

Market Power Cost Efficiency Efficiency Gain Profit Function Profit Efficiency 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media Dordrecht 1998

Authors and Affiliations

  • Allen N. Berger

There are no affiliations available

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