Value creating mergers: British bank consolidation, 1885–1925 |
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| Institution: | 1. Tilburg University, the Netherlands;2. Erasmus University, the Netherlands;3. Monash University, Australia;1. KU Leuven, Faculty of Economics and Business, Campus Brussels, Warmoesberg 26, B-1000 Brussels, Belgium;2. Central Michigan University, Mount Pleasant, MI 48858, USA;3. Department of Economics and the Center for Governance and Markets, University of Pittsburgh, Pittsburgh, PA 15206, USA;1. Chapman University, 1 University Drive, Orange, CA 92866;2. University of Zurich, Schönberggasse 1, 8001 Zürich, Switzerland;1. CPB Netherlands Bureau for Economic Policy Analysis, Postbus 80510, 2508 GM Den Haag, The Netherlands;2. Department of Economics, Econometrics & Finance, Faculty of Economics & Business, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands;1. All Souls College, University of Oxford, OX1 4AL, United Kingdom;2. Faculty of Economics, University of Cambridge, CB3 9DD, United Kingdom;1. School of Economics and Finance, Castlecliffe, The Scores, University of St Andrews, St Andrews, KY16 9AZ, Scotland;2. Department of Economics, Williams College of Business, Xavier University, ML 1212, 3800 Victory Parkway, Cincinnati, OH 45207, USA;3. Department of Economics, Hankamer School of Business, Baylor University, One Bear Place 98001, Waco, TX 76798, USA |
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| Abstract: | The British banking sector had many small banks in the mid-nineteenth century. From around 1885 until the end of World War One there was a process of increasingly larger mergers between banks. By the end of the merger wave the English and Welsh market was highly concentrated, with only five major banks. News of a merger brought a persistent rise in the share prices of both the acquiring and the target bank (roughly 1% and 7%, respectively). Non-merging banks, especially those whose local market concentration rose because of the merger, saw their stock prices rise. Our findings suggest that the process of bank consolidation increased collusive behavior among merged banks, to the likely detriment of the consumer. |
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