Why Do Banks Merge?

Dario Focarelli, Fabio Panetta and Carmelo Salleo

Journal of Money, Credit and Banking, 2002, vol. 34, issue 4, 1047-66

Abstract: The banking industry is consolidating at an accelerating pace, yet no conclusive results have emerged on the benefits of mergers and acquisitions. In order to investigate the motives and results of each type of deal we consider separately acquisitions (that is, the purchase of the majority of voting shares) and mergers, using Italian data. Mergers seek to improve income from services, but the increase is offset by higher staff costs; return on equity improves because of a decrease in capital. Acquisitions aim to restructure the loan portfolio of the acquired bank; improved lending policies result in higher profits.

Date: 2002
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Related works:
Working Paper: Why do Banks Merge? (2003)
Working Paper: Why Do Banks Merge? (1999)
Working Paper: Why do Banks Merge? (1999)
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