Cross-Market Effects of Consolidation: Evidence from Banking

Andrew Bird, Ding Du and Stephen A Karolyi

The Review of Corporate Finance Studies, 2024, vol. 13, issue 4, 999-1029

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.

JEL-codes: G21 G28 G34 L40 (search for similar items in EconPapers)
Date: 2024
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