Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers

66 Pages Posted: 8 Jul 2021 Last revised: 20 Jun 2023

See all articles by David Benson

David Benson

Board of Governors of the Federal Reserve System

Samuel Blattner

affiliation not provided to SSRN

Serafin Grundl

Board of Governors of the Federal Reserve System

You Suk Kim

Board of Governors of the Federal Reserve System

Ken Onishi

Board of Governors of the Federal Reserve System

Date Written: June 20, 2023

Abstract

Antitrust often uses the Herfindahl-Hirschman Index (HHI) for merger screening and review. We argue that HHI-based antitrust policy using predefined markets in the banking industry misses anticompetitive effects that are predicted by the proximity of merging branch networks. Difference-in-differences estimates from thousands of mergers reveal that close-proximity bank acquisitions have harmful effects, including branch closures, even if they fall below the HHI threshold for enforcement. Neither lowering the threshold nor using narrower predefined markets addresses this under-enforcement without introducing significant over- and under-enforcement of other transactions. However, using a proximity threshold to complement the HHI policy could improve
bank antitrust.

Keywords: Antitrust, Banking, Mergers & Acquisitions, Heterogeneous effects, Non-price effects, Difference-in-Differences

JEL Classification: L41, G34, L22

Suggested Citation

Benson, David and Blattner, Samuel and Grundl, Serafin and Kim, You Suk and Onishi, Ken, Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers (June 20, 2023). Available at SSRN: https://ssrn.com/abstract=3873502 or http://dx.doi.org/10.2139/ssrn.3873502

David Benson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Samuel Blattner

affiliation not provided to SSRN

Serafin Grundl

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

You Suk Kim

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ken Onishi (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th St and C Ave, NW
Washington, DC 20551
United States

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