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Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers

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Listed:
  • David Benson
  • Samuel Blattner
  • Serafin Grundl
  • You Suk Kim
  • Ken Onishi

Abstract

Antitrust often uses the Herfindahl-Hirschman Index (HHI) for merger screening and review. We argue that HHI-based antitrust policy using predefined markets in the banking industry misses anticompetitive effects that are predicted by the proximity of merging branch networks. Difference-in-differences estimates from thousands of mergers reveal that close-proximity bank acquisitions have harmful effects, including branch closures, even if they fall below the HHI threshold for enforcement. Neither lowering the threshold nor using narrower predefined markets addresses this underenforcement without introducing significant overenforcement and underenforcement of other transactions. However, using a proximity threshold to complement the HHI policy could improve bank antitrust.

Suggested Citation

  • David Benson & Samuel Blattner & Serafin Grundl & You Suk Kim & Ken Onishi, 2024. "Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 107-133, August.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:3:p:107-33
    DOI: 10.1257/mic.20220094
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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