The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future

69 Pages Posted: 29 Nov 1998

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Rebecca S. Demsetz

Data For Decisions LLC

Multiple version iconThere are 2 versions of this paper

Date Written: December 1998

Abstract

This article designs a framework for evaluating the causes, consequences, and future implications of financial services industry consolidation, reviews the extant research literature within the context of this framework (over 250 references), and suggests fruitful avenues for future research. The evidence is consistent with increases in market power from some types of consolidation; improvements in profit efficiency and diversification of risks, but little or no cost efficiency improvements on average; relatively little effect on the availability of services to small customers; potential improvements in payments system efficiency; and potential costs on the financial system from increasing systemic risk or expanding the financial safety net.

Keywords: banks, mergers, payments, small business

JEL Classification: G21, G28, G34, E58, L89

Suggested Citation

Berger, Allen N. and Strahan, Philip E. and Demsetz, Rebecca S., The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future (December 1998). FRB of New York Staff Report No. 55. Available at SSRN: https://ssrn.com/abstract=139456 or http://dx.doi.org/10.2139/ssrn.139456

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

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Wharton Financial Institutions Center

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European Banking Center

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Philip E. Strahan

Boston College - Department of Finance ( email )

Carroll School of Management
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617-552-0431 (Fax)

HOME PAGE: http://www2.bc.edu/~strahan

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Rebecca S. Demsetz

Data For Decisions LLC ( email )

11 Winthrop Circle
Weston, MA 02493
United States

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