The Impact of Mergers and Acquisitions on the Efficiency of the U.S. Banking Industry: Further Evidence

21 Pages Posted: 15 Feb 2008  

Adel A. Al-Sharkas

Alfred University

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Shari Lawrence

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: 2007-03

Abstract

Using the Stochastic Frontier Approach (SFA), this study investigates the cost and profit efficiency effects of bank mergers on the US banking industry. We also use the non-parametric technique of Data Envelopment Analysis (DEA) to evaluate the production structure of merged and non-merged banks. The empirical results indicate that mergers have improved the cost and profit efficiencies of banks. Further, evidence shows that merged banks have lower costs than non-merged banks because they are using the most efficient technology available (technical efficiency) as well as a cost minimizing input mix (allocative efficiency). The results suggest that there is an economic rational for future mergers in the banking industry. Finally, mergers may allow the banking industry to take advantage of the opportunities created by improved technology.

Suggested Citation

Al-Sharkas, Adel A. and Hassan, M. Kabir and Lawrence, Shari, The Impact of Mergers and Acquisitions on the Efficiency of the U.S. Banking Industry: Further Evidence (2007-03). Journal of Business Finance & Accounting, Vol. 35, Issue 1-2, pp. 50-70, January-March 2008. Available at SSRN: https://ssrn.com/abstract=1091592 or http://dx.doi.org/10.1111/j.1468-5957.2007.02059.x

Adel A. Al-Sharkas (Contact Author)

Alfred University ( email )

Alfred, NY 14802

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Shari Lawrence

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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