Mergers in Banking from an Antitrust Perspective
Bocconi University - Department of Economics
May 08, 2013
This paper analyses the relation between competition and concentration in a monopolistic competition model where banks compete in branching and interest rates and where M&As as well as the overall market structure are endogenously determined. The model is tested on data on Bank Groups, collected in 2007 when several mergers occurred in Italy. The estimates of the empirical model yield measures of the degree of competition in local markets in Italy, as well as measures of the implicit value of a branch traded in M&A operations both by bank involved in the merger and by local market. The paper finds that competition did decrease following two mergers among the biggest Italian Banks, but that with later mergers competition was more or less returned to the 2006 degree of toughness. In addition it results that the acquisition cost of a traded branch tends to be lower than the profit it can generate. These measures may be relevant in antitrust analyses and for competition policy purposes, and they are extremely parsimonious in terms of data requirements.
Number of Pages in PDF File: 18
Keywords: Banking industry, Competition and market structure, Merger policy
JEL Classification: G21, L13, L59
Date posted: November 12, 2013