A Test of the Impact of Mergers on Bank Competition

35 Pages Posted: 12 Dec 2009 Last revised: 25 Jan 2019

See all articles by Barbara Chizzolini

Barbara Chizzolini

Bocconi University - Department of Economics

Vittoria Cerasi

Bicocca University - Department of Economics, Management & Statistics (DEMS)

Marc Ivaldi

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: January 24, 2019

Abstract

We propose a new test to evaluate the impact of horizontal mergers on competition in the banking industry. The test is designed to be applied ex-ante to potential mergers while being parsimonious in terms of data, as it only uses information on branches in local markets. The test is a counterfactual exercise based on a two-stage model where banks compete in branching and interest rates and consists in comparing the estimated degree of competition in the status- quo, where branching networks by banks are those actually observed, with a counterfactual scenario, where the branching network of the new entity is the sum of the branches of the banks involved in the horizontal merger. The statistical difference between the two estimated measures of competition quantifies the impact of the merger. We apply our test to French and Italian mergers.

Keywords: Banking industry, Competition and market structure, Merger policy

JEL Classification: G21, L13, L59

Suggested Citation

Chizzolini, Barbara and Cerasi, Vittoria and Ivaldi, Marc, A Test of the Impact of Mergers on Bank Competition (January 24, 2019). Available at SSRN: https://ssrn.com/abstract=1522006 or http://dx.doi.org/10.2139/ssrn.1522006

Barbara Chizzolini

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Vittoria Cerasi (Contact Author)

Bicocca University - Department of Economics, Management & Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy
+39-02-64485821 (Phone)
+39-02-64485878 (Fax)

Marc Ivaldi

Toulouse School of Economics ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 8592 (Phone)
+33 5 61 12 8637 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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