The Determinants of Bank Mergers: A Revealed Preference Analysis

Management Science 2016, 62 (8), 2241-2258

45 Pages Posted: 28 Jun 2014 Last revised: 28 Dec 2016

Oktay Akkus

Bates White

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Ali Hortacsu

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 20, 2015

Abstract

We provide new estimates of merger value creation by exploiting revealed preferences of merging banks within a matching market framework. We find that merger value arises from cost efficiencies in overlapping markets, relaxing of regulation, and network effects exhibited by the acquirer-target matching. Beyond our findings, the revealed preference method has notable advantages that warrant its application beyond the bank merger market. Notably, we show the method outperforms reduced form alternatives out of sample, enables sensible counterfactual experiments, and that it can be used to evaluate private-to-private mergers, which have been understudied due to lack of stock market data.

Keywords: mergers, matching, empirical matching models, antitrust, maximum score estimation, banking

JEL Classification: G34, C14, C78

Suggested Citation

Akkus, Oktay and Cookson, J. Anthony and Hortacsu, Ali, The Determinants of Bank Mergers: A Revealed Preference Analysis (March 20, 2015). Management Science 2016, 62 (8), 2241-2258. Available at SSRN: https://ssrn.com/abstract=2459727 or http://dx.doi.org/10.2139/ssrn.2459727

Oktay Akkus

Bates White ( email )

1300 I Street NW
Washington, DC 20005
United States

J. Anthony Cookson (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Ali Hortacsu

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-5841 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
358
rank
76,671
Abstract Views
1,475
PlumX