Mergers in Banking from an Antitrust Perspective

18 Pages Posted: 12 Nov 2013  

Barbara Chizzolini

Bocconi University - Department of Economics

Date Written: May 08, 2013

Abstract

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.

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

JEL Classification: G21, L13, L59

Suggested Citation

Chizzolini, Barbara, Mergers in Banking from an Antitrust Perspective (May 08, 2013). Available at SSRN: https://ssrn.com/abstract=2352971 or http://dx.doi.org/10.2139/ssrn.2352971

Barbara Chizzolini (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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