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

56 Pages Posted: 8 Jul 2021 Last revised: 15 Oct 2021

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: September 21, 2021

Abstract

Market concentration (HHI) based antitrust policy can be vulnerable to mismeasurement of substitutability. We provide evidence demonstrating this vulnerability in the banking industry, and argue that HHI-based bank antitrust review can be improved by incorporating a determinant of substitutability between merging banks: the proximity of their branch networks. Using difference-in-differences to estimate the effects of bank mergers, we find that mergers of close-proximity banks lead to more branch closures and to repositioning that is less beneficial for consumer access. Moreover, although rivals offer worse interest rates (prices) after close-proximity mergers, the merging parties' deposit growth (quantity) declines. These results hold for transactions that evade HHI-based enforcement criteria. Our findings also inform antitrust policy for other industries where firms’ locations are an important and observable determinant of substitutability.

Keywords: Mergers and acquisitions, Merger Policy, Merger screening

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 (September 21, 2021). 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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