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

Journal of Banking and Finance, Vol. 23, Issues 2/3/4, February 1999

Posted: 8 Feb 1999

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

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Abstract

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

Note: This is a description of the paper and is not the actual abstract.

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. Journal of Banking and Finance, Vol. 23, Issues 2/3/4, February 1999. Available at SSRN: https://ssrn.com/abstract=149077

Allen N. Berger (Contact Author)

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

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Columbia, SC 29208
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Wharton Financial Institutions Center

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European Banking Center

P.O. Box 90153
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Philip E. Strahan

Boston College - Department of Finance ( email )

Carroll School of Management
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617-552-6430 (Phone)
617-552-0431 (Fax)

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rebecca S. Demsetz

Data For Decisions LLC ( email )

11 Winthrop Circle
Weston, MA 02493
United States

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