Cross-Market Effects of Consolidation: Evidence from Banking

Authors

Andrew Bird, Chapman UniversityFollow
Ding Du, U.S. Department of the Treasury
Stephen A. Karolyi, U.S. Department of the Treasury

Document Type

Article

Publication Date

5-6-2024

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.

Comments

This article was originally published in The Review of Corporate Finance Studies in 2024. https://doi.org/10.1093/rcfs/cfae012

Recommended Citation

Andrew Bird, Ding Du, Stephen A Karolyi, Cross-Market Effects of Consolidation: Evidence from Banking, The Review of Corporate Finance Studies, 2024;, cfae012, https://doi.org/10.1093/rcfs/cfae012

Peer Reviewed

1

Copyright

This work is written by (a) US Government employee(s) and is in the public domain in the US.