The Success of Bank Mergers Revisited: An Assessment Based on a Matching Strategy

40 Pages Posted: 8 Jun 2016

See all articles by Andreas Behr

Andreas Behr

University of Muenster - Faculty of Economics

Frank Heid

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

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

JEL Classification: G34, G21

Suggested Citation

Behr, Andreas and Heid, Frank, The Success of Bank Mergers Revisited: An Assessment Based on a Matching Strategy (2008). Bundesbank Series 2 Discussion Paper No. 2008,06, Available at SSRN: https://ssrn.com/abstract=2794010 or http://dx.doi.org/10.2139/ssrn.2794010

Andreas Behr

University of Muenster - Faculty of Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

Frank Heid (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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