Are Mergers Beneficial to Consumers? Evidence from the Italian Market for Bank Deposits
Focarelli DarioPanetta Fabio
CEIS Research Paper
The general conclusion of the empirical literature is that in-market consolidation generates adverse price changes, thereby harming consumers. Previous studies, however, look only at the short-run pricing impact of consolidation, ignoring all effects that take a longer time to materialize. Using a database that includes detailed information on the deposit rate paid by individual banks in local markets to different categories of depositors, we investigate for the first time the long-run pricing effects of M&As. We find strong evidence that, although in the short run consolidation generates adverse price changes, these are only a temporary phenomenon. In the long run efficiency gains dominate over the market power effect of mergers, leading to more favorable prices for consumers.
Keywords: Mergers, Efficiency, Market Power, Bank Mergers
JEL codes: G21, G34, L1
Date: Friday, April 18, 2003
Revision Date: Friday, April 18, 2003