Findings do not indicate poorly-managed firms are more likely to be acquired than well-managed firms. The analysis uses a sample of 1, 046Texas banks that existed in 1970, out of which 201 were acqui red during the period 1970-82. A multinomial logit procedure is used to estimate the relationship between the likelihood of acquisition and the characteristics of the target firm and its market. Additional results suggest that firms with la rge market shares, low capital/asset ratios, and operations in urban areas are r elatively likely to be acquired but not firms with low profits or low growth.

This paper examines the relationship between the profitability of small single-market banks and the presence in the market of large banking organizations and banking organizations that operate primarily outside of the local banking market. We find that, in rural banking markets, the profitability of small single-market banks is significantly related to the presence of both large and small primarily-out-of-market banks. We also find that an increased presence of large or small primarily-out-of-market banks in rural banking markets reduces the positive effect of an increase in concentration on small single-market bank profits. This finding is consistent with theoretical predictions reported in the recent literature and has important implications for antitrust policy. In urban banking markets, we find little evidence of any relationship between the profitability of small single-market banks and the presence of large or primarily-out-of-market banks.

Retail banking markets have traditionally been viewed as locally limited. However, recent studies have found evidence that large multimarket banking organizations tend to offer uniform interest rates for retail deposit accounts throughout the area that they serve, at least within a given state. This uniform pricing phenomenon raises questions about the continued relevance of the concept of local banking markets for both research and antitrust purposes. We address this issue by employing a model designed to explain the pricing behavior of single-market banks that face competition from multimarket banks. Empirical results are found to be consistent with the many implications of the model. We find that even with multimarket banks present in the market, local market concentration influences the pricing behavior of single-market banks; however, this relationship weakens as the market share of multimarket banks grows. We also find that, on average, multimarket banks offer lower deposit interest rates than do single-market banks operating in the same market, and, in most cases, greater multimarket bank presence is associated with lower deposit interest rates offered by single-market banks.

We employ a procedure suggested by the Department of Justice's Merger Guidelines (but never before applied to banking) to determine whether nonbank financial institutions should be included as participants in defining the product market relevant to antitrust analyses of proposed bank mergers. We estimate bank “residual supply” relationships indicating the responsiveness of small-scale deposit funds supplied by consumers to the level of interest rates offered for such deposits. Estimated elasticities of residual deposit supply are quite small, implying that only commercial banks should be included as participants in the “antitrust market” relevant to proposed bank mergers.

This paper examines the impact of bank adoptions of automated teller machines (ATMS) on subsequent levels of concentration in local banking markets. The findings suggest that banks have had some success in using ATMs to attract customers from competitors. As a consequence, technology adoption's impact on market structure depends upon whether it is the larger or smaller firms within the market that adopt the new technology. Large firm adoptions increase concentration levels, while small firm adoptions tend to reduce them. The evidence also suggest that a state of structural disequilibrium seems to be characteristic of banking markets.

This paper investigates depository institutions' decisions whether or not to impose surcharges (direct usage fees) on nondepositors who use their ATMs. In addition to documenting patterns of surcharging, we examine motives for surcharging, including both direct generation of fee revenue and the potential to attract deposit customers who wish to avoid incurring surcharges at an institution's ATMs. Consistent with expectations, we find that the probability of surcharging increases with both the institution's share of market ATMs and the time since surcharging was first allowed in the state, and decreases with increasing local ATM density. Further, we find evidence consistent with the use of surcharges to attract deposit customers who are new to the local banking market, but we find no evidence that larger banks use surcharges as a means to attract existing customers away from smaller local competitors.

This study tests for the presence of prejudicial or “noneconomic” discrimination on the part of mortgage lenders by evaluating the performance of home mortgage loans. The approach differs from that of previous studies of loan performance in that it is based on the proposition that noneconomic discrimination should be more pronounced in less competitive lending environments, while statistical discrimination should not. Using a rich set of FHA-insured loan records and measures of local market concentration to proxy the competitive environment, we test for the prediction of better loan performance by minority borrowers relative to white borrowers in more concentrated markets. We argue that this approach substantially reduces the potential for omitted-variable bias that has cast a shadow on previous studies of lending discrimination. Results fail to reject the null hypothesis of no noneconomic discrimination.