Do mergers improve the x-efficiency and scale efficiency of U.S. banks?: Evidence from the 1980s

Abstract: A central issue currently debated among bank analysts and economists is whether mergers enhance the efficiency of surviving banks. This paper investigates the postmerger performance of acquiring banks that participated in a merger during 1980-90. The evidence suggests that acquiring banks failed to improve postmerger X-efficiency. However, we find that acquiring banks experienced moderate gains in profitability and scale efficiency relative to a control sample. The second part of the paper uses regression analysis to identify factors influencing the performance of bank merger survivors. The regression results suggest that improvements in postmerger performance depend on the ability of the bank to strengthen asset quality. We find no evidence to support the hypothesis that in-market mergers lead to significant improvements in efficiency.

Keywords: Bank management; Bank mergers;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Research Paper

Publication Date: 1996

Number: 9623