What's Happened at Divested Bank Offices? An Empirical Analysis of Antitrust Divestitures in Bank Mergers

30 Pages Posted: 25 Apr 2003

Date Written: December 2002

Abstract

In their competitive analysis of proposed bank mergers, the Federal Reserve Board, Department of Justice, and other agencies accept branch divestitures as an antitrust remedy in local markets where there is substantial overlap between the acquirer and target. The results of this study, which examines the performance of 751 branches that were divested between June 1989 and June 1998 in conjunction with a merger that raised possible competition issues, suggest that the policy of accepting branch divestitures as an antitrust remedy has been successful. Divested branches operate for lengths of time that are comparable to all branches, and even though they experience substantial deposit runoff around the time of the merger, divested branches subsequently exhibit deposit growth rates that are comparable to those of other similar branches. Cross-sectional analysis does not find any significant relationships between either deposit runoff or subsequent growth and various characteristics of the branch being sold or the firm that purchased it, except for some evidence that post-divestiture growth may increase with the size of the purchaser.

Keywords: Divestiture, bank, merger, acquisition, antitrust, competition, branch

JEL Classification: G28, G34, G21, D40, L40

Suggested Citation

Pilloff, Steven J., What's Happened at Divested Bank Offices? An Empirical Analysis of Antitrust Divestitures in Bank Mergers (December 2002). Available at SSRN: https://ssrn.com/abstract=380343 or http://dx.doi.org/10.2139/ssrn.380343

Steven J. Pilloff (Contact Author)

U.S. Financial Structure Section ( email )

20th and C Streets, NW
Washington, DC 20551
202-736-5622 (Phone)
202-728-5838 (Fax)

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