How does competition affect retail banking? Quasi-experimental evidence from bank mergers

Jack Liebersohn

Journal of Financial Economics, 2024, vol. 154, issue C

Abstract: This paper studies bank antitrust rules which discontinuously shift bank mergers' competitive impact. The likelihood of mandatory divestiture rises sharply for mergers in markets above a threshold level of concentration, leading to an increase in the number of banks in these markets. Consistent with greater competition, intervention leads to higher deposit rates. Mortgage originations rise by 11%, from both refinancing and purchases. However, small business loan quantities do not change. The effects of intervention do not dissipate over time, and nonbank lenders respond similarly to banks. Overall, antitrust rules can increase bank competition, but relationships protect banks from competitors.

Keywords: Banking; Financial institutions; Competition; Antitrust; Deposits (search for similar items in EconPapers)
JEL-codes: G21 G28 K21 L41 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:154:y:2024:i:c:s0304405x24000205

DOI: 10.1016/j.jfineco.2024.103797

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