The Review of Corporate Finance Studies Vol. 13 No. 4 2024

Cross-Market Effects of Consolidation: Evidence from Banking

Andrew Bird¹; Ding Du²; Stephen A. Karolyi²

¹ Argyros College of Business & Economics, Chapman University , · ² Office of the Comptroller of the Currency, U.S. Department of the Treasury ,

Abstract

The U.S. banking sector had nearly 70% fewer banks in 2022 relative to 1989, primarily because of mergers. We develop a methodology to estimate cross-market spillover effects of bank mergers and test whether the operations of incumbents facing consolidating competitors in one market are affected in other markets. We find that nonmerging banks within a market that are one standard deviation more exposed to mergers in other markets increase deposits by 2.1% relative to their less exposed competitors. Our methodology may be applied elsewhere to assess the aggregate impacts of industry consolidation and illustrates challenges with product-based or geographic market definitions.

DOI

10.1093/rcfs/cfae012

Volume

13

Issue

4

Pages

999-1029

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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