Consolidation and efficiency in the financial sector: A review of the international evidence

Abstract

In response to fundamental changes in regulation and technology, the financial industry around the world is undergoing an unprecedented wave of consolidation. A growing body of empirical literature has attempted to measure the efficiency gains from M&As; however there is little sense of how the results might depend on the country, industry and time period analysed. In this paper we review critically works that cover the main sectors of the financial industry (commercial and investment banks, insurance and asset management companies) in the major industrialised countries over the last twenty years, searching for common patterns that transcend national and sectoral peculiarities. We find that consolidation in the financial sector is beneficial up to a relatively small size in order to reap economies of scale, but there is little evidence that mergers yield economies of scope or gains in managerial efficiency.

Cross-Border Bank Acquisitions: Is there a Performance Effect?

“…This result implies that acquirers target banks with a significant revenue stream not tied to interests in developed countries. It is consistent with a larger emphasis on economies of scope in these countries (Amel et al 2004). …”

“…First, if it is assumed that managers' objective is to maximize the value of the firm, there are three possible explanations for a bank's international expansion: cross-border acquisitions are valuable for the acquirer in the long run, so any short run analysis will underestimate their benefits (Amel et al 2004); when MNBs decide to expand abroad, they do not internalize the potential entry of other MNBs-reducing the profit margins in the host country-or undervalue the transaction cost of operating a subsidiary abroad; finally, MNBs may expand internationally to diversify their portfolio geographically, then, the decision to enter a particular country will depend on the global Table 13 Costs, revenue, economic integration and information costs-Emerging vs. Developed economies.…”

“…Is there any post-acquisition difference in performance for targets in developed and emerging economies? Is it influenced by hostcountry or home-country characteristics?The cross-border banking M&A literature has analyzed different motives that banks have to expand abroad (Amel et al 2004). The first question addressed in this study…”

“…The cross-border banking M&A literature has analyzed different motives that banks have to expand abroad (Amel et al 2004). The first question addressed in this study…”

Evaluation of Pre and Post Demerger-Merger Performance: Using ABN AMRO Bank as an Example

“…Calomiris and Karenski (1996) and Caprion (1999) provided evidences that Merger and Acquisition influence the efficiency of most banks positively. While on other hand, another study showed performance is not positively influenced by mergers and acquisitions operations in United States banking industry in terms of efficiency (Amel, Barnes, Panetta, & Salleo, 2004). Cornett et al (2006) found that operating performance of merged banks increases appreciably (Cornett, McNutt, & Tehranian, 2006).…”