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Counterfactual Analysis of Bank Mergers

41 Pages Posted: 24 Jul 2010 Last revised: 21 Oct 2014

Pedro P. Barros

Universidade Nova de Lisboa

Diana Bonfim

Banco de Portugal

Moshe Kim

University of Haifa - Department of Economics

Nuno C. Martins

Bank of Portugal; Universidade Nova de Lisboa

Date Written: July 16, 2010

Abstract

Estimating the impact of bank mergers requires a framework distinguishing endogenous changes in market structure and conduct from exogenous changes. Conventionally, the literature relies on differential analysis, considering market structure as exogenous by using concentration indexes such as the HHI. We introduce an econometric methodology relying on a structural model of the credit market from which we derive a counterfactual scenario of what would have happened if mergers had not occurred. We find that mergers increased firms' access to credit, but had an opposite effect on households. Moreover, we find that mergers led to a widespread decrease in interest rates.

Keywords: banks, mergers, competition

JEL Classification: G21, G34, L10

Suggested Citation

Barros, Pedro P. and Bonfim, Diana and Kim, Moshe and Martins, Nuno C., Counterfactual Analysis of Bank Mergers (July 16, 2010). Empirical Economics, Vol. 46, No. 1, 2014. Available at SSRN: https://ssrn.com/abstract=1641305 or http://dx.doi.org/10.2139/ssrn.1641305

Pedro Luis Pita Barros

Universidade Nova de Lisboa ( email )

Campus de Campolide
Lisboa, 1099-032
Portugal
+351 21 383 3624 (Phone)
+351 21 388 6073 (Fax)

HOME PAGE: http://ppbarros.fe.unl.pt

Diana Bonfim (Contact Author)

Banco de Portugal ( email )

Av Almirante Reis, 71
P-1150-012 Lisboa
Portugal

Moshe Kim

University of Haifa - Department of Economics ( email )

Haifa 31905
Israel
(972) 4 8240115 (Phone)
(972)4-8240059 (Fax)

Nuno C. Martins

Bank of Portugal ( email )

Avenida Almirante Reis 71
Lisbon 1150-012
Portugal
(351) 213130938 (Phone)

Universidade Nova de Lisboa

Lisbon
Portugal

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