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Are mergers among cooperative banks worth a dime? Evidence on post-M&A efficiency in Italy

Paolo Coccorese (), Giovanni Ferri and Fabiola Spiniello
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Fabiola Spiniello: University of Salerno

No wpC18, CERBE Working Papers from CERBE Center for Relationship Banking and Economics

Abstract: In this paper we study the intense wave of mergers among Italian mutual cooperative banks (Banche di Credito Cooperativo, BCCs) and try to assess whether those mergers were efficiency-enhancing. For the purpose, we employ a two-step procedure: we first estimate bank-level cost efficiency scores for a large sample of Italian banks in the period 1993-2013 by means of a stochastic frontier approach, then we try to explain the estimated BCCs’ cost efficiency with a set of merger status dummy variables (never merged, before the first merger, merged once, merged twice, etc.) as well as with a vector of control variables. We find that mergers increase mutual banks’ cost efficiency only after a BCC has merged at least three successive times with other BCCs, hence after reaching a remarkably large size. However, we conjecture that this growth in size could harm especially marginal borrowers (i.e. those who are likely to be served by smaller banks but neglected by bigger ones), with a strong and adverse impact on development and inequality and in contrast with BCCs’ ethics and mission.

Keywords: Banking; Cooperative banks; Mergers; Efficiency (search for similar items in EconPapers)
JEL-codes: D40 G21 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-com and nep-eff
Date: 2017-03
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