The success of bank mergers revisited: an assessment based on a matching strategy

Frank Heid and Andreas Behr

No 2008,06, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: The question of whether or not mergers and acquisitions have helped to enhance banks' efficiency and profitability has not yet been conclusively resolved in the literature. We argue that this is partly due to the severe methodological problems involved. In this study, we analyze the effect of German bank mergers in the period 1995-2000 on banks' profitability and cost efficiency. We suggest a new matching strategy to control for the selection effects arising from the fact that predominantly under-performing banks engage in mergers. Our results indicate a neutral effect of mergers on profitability and a positive effect on cost efficiency. Comparing our results with those obtained from a naive performance comparison of merging and non-merging banks indicates a severe negative selection bias with regard to the former.

Keywords: Bank mergers; performance measurement; propensity score matching (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ban, nep-com and nep-eff
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Citations: View citations in EconPapers (4)

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Journal Article: The success of bank mergers revisited. An assessment based on a matching strategy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:7316

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