Evaluating the German bank merger wave

Michael Koetter

No 2005,12, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: German banks experienced a merger wave throughout the 1990s. However, the success of bank mergers remains a continuous matter of debate. In this paper we suggest a taxonomy as how to evaluate post-merger performance on the basis of cost efficiency (CE). We categorise mergers a success that fulfill simultaneously two criteria. First, merged institutes must exhibit CE levels above the average of non-merging banks. Second, banks must exhibit CE changes between merger and evaluation year above efficiency changes of non-merging banks. We employ this taxonomy to characterise (successful) mergers in terms of various key-performance and structural indicators and investigate the implications for three important policy issues. Our main conclusions are twofold. First, approximately every second merger is a success. Second, the margin of success is narrow, as the CE differential between merging and non-merging banks is one percentage point.

Keywords: Banks mergers; regulation; distress; cost efficiency; Germany (search for similar items in EconPapers)
JEL-codes: G21 G28 G33 G34 L44 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-ban, nep-com, nep-cse, nep-eff, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Evaluating the German Bank Merger Wave (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:4267

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