The Impact of Mergers on the Degree of Competition in the Banking Industry

29 Pages Posted: 12 Dec 2009  

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: November 24, 2009

Abstract

This paper analyses the relation between competition and concentration in the banking sector. The empirical answer is given by testing a monopolistic competition model of bank branching behaviour on individual bank data at county level (départements and provinces) in France and Italy. We propose a measure of the degree of competiveness in each local market that is function also of market structure indicators. We then use the econometric model to evaluate the impact of horizontal mergers among incumbent banks on competition and discuss when, depending on the pre-merger structure of the market and geographic distribution of branches, the merger is anti-competitive. The paper has implications for competition policy as it suggests an applied tool to evaluate the potential anti-competitive impact of 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, The Impact of Mergers on the Degree of Competition in the Banking Industry (November 24, 2009). 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)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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