The impact of mega-mergers on uninsured depositors: Evidence from Indian commercial banks

Sakshi Narula

International Review of Economics & Finance, 2025, vol. 99, issue C

Abstract: This paper investigates how depositors fare in banking mega-mergers. The theoretical section demonstrates that the banks communicate their risk profile to depositors using an interest rate signalling model. These signalling efforts become particularly strong during mega-mergers when depositors’ concerns regarding deposit interest rates intensify. The empirical section examines the impact of the 2019 Indian commercial bank mega-merger on acquiring bank depositors from 2000 to 2023. The study leverages the heterogeneity in the bank’s ownership structure to address two empirical questions (i) Did the 2019 mega-merger affect Indian depositors? (ii) Do depositors associate with the interest ratios following a mega-merger? The study finds that mega-mergers have a positive effect on acquiring bank depositors. The private benefits given to high-value depositors outweigh the public information provided to average depositors. The study reports that average depositors of acquiring banks are positively associated with interest spread post-mega-merger. High-value depositors do not associate with interest ratios during mega-mergers.

Keywords: Bank risk; Difference in difference; Signalling; Depositor behaviour; Merger (search for similar items in EconPapers)
JEL-codes: C23 G10 G21 G28 G30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001467

DOI: 10.1016/j.iref.2025.103983

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