Are Mergers among Cooperative Banks Worth a Dime? Evidence on Post-M&A Efficiency in Italy

Center for Relationship Banking and Economics Working Paper Series #18 (2017)

42 Pages Posted: 16 Apr 2019

See all articles by Paolo Coccorese

Paolo Coccorese

University of Salerno - Department of Economics

Giovanni Ferri

LUMSA University

Fabiola Spiniello

University of Salerno - Department of Economics

Date Written: March 15, 2017

Abstract

In this paper we study the intense wave of mergers among Italian mutual cooperative banks (Banche di Credito Cooperativo, BCCs) and try to assess whether those mergers were efficiency-enhancing. For the purpose, we employ a two-step procedure: we first estimate bank-level cost efficiency scores for a large sample of Italian banks in the period 1993-2013 by means of a stochastic frontier approach, then we try to explain the estimated BCCs’ cost efficiency with a set of merger status dummy variables (never merged, before the first merger, merged once, merged twice, etc.) as well as with a vector of control variables. We find that mergers increase mutual banks’ cost efficiency only after a BCC has merged at least three successive times with other BCCs, hence after reaching a remarkably large size. However, we conjecture that this growth in size could harm especially marginal borrowers (i.e. those who are likely to be served by smaller banks but neglected by bigger ones), with a strong and adverse impact on development and inequality and in contrast with BCCs’ ethics and mission.

Keywords: banking, cooperative banks, mergers, efficiency

JEL Classification: D40, G21, G34

Suggested Citation

Coccorese, Paolo and Ferri, Giovanni and Spiniello, Fabiola, Are Mergers among Cooperative Banks Worth a Dime? Evidence on Post-M&A Efficiency in Italy (March 15, 2017). Center for Relationship Banking and Economics Working Paper Series #18 (2017). Available at SSRN: https://ssrn.com/abstract=3353899 or http://dx.doi.org/10.2139/ssrn.3353899

Paolo Coccorese

University of Salerno - Department of Economics ( email )

Via Giovanni Paolo II, 132
Fisciano, Salerno 84084
Italy

Giovanni Ferri (Contact Author)

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

Fabiola Spiniello

University of Salerno - Department of Economics

Via John Paul II, 132
Fisciano (SA), 84084
Italy

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