Branching Deregulation and Merger Optimality

Ana Lozano-Vivas, Miguel Meléndez-Jiménez () and Antonio Morales ()

No 2010-02, Working Papers from Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center

Abstract: The U.S. banking industry has been characterized by intense merger activity in the absence of economies of scale and scope. We claim that the loosening of geographic constraints on U.S. banks is responsible for this consolidation process, irrespective of value-maximizing motives. We demonstrate this by putting forward a theoretical model of banking competition and studying banks’ strategic responses to geographic deregulation. We show that even in the absence of economies of scale and scope, bank mergers represent an optimal response. Also, we show that the consolidation process is characterized by merger waves and that some equilibrium mergers are not profitable per se -they yield losses- but become profitable as the waves of mergers unfold.

Keywords: Banking Competition; Deregulation; Mergers (search for similar items in EconPapers)
JEL-codes: C72 G21 G28 L13 L41 L51 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-03
New Economics Papers: this item is included in nep-ban, nep-bec, nep-com and nep-ind
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https://theeconomics.uma.es/malagawpseries/Papers/METCwp2010-2.pdf First version, 2010 (application/pdf)

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Journal Article: Branching Deregulation and Merger Optimality (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:mal:wpaper:2010-2

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