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The impact of mega-mergers on uninsured depositors: Evidence from Indian commercial banks

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  • Narula, Sakshi

Abstract

This paper investigates how depositors fare in banking mega-mergers. The theoretical section demonstrates that the banks communicate their risk profile to depositors using an interest rate signalling model. These signalling efforts become particularly strong during mega-mergers when depositors’ concerns regarding deposit interest rates intensify. The empirical section examines the impact of the 2019 Indian commercial bank mega-merger on acquiring bank depositors from 2000 to 2023. The study leverages the heterogeneity in the bank’s ownership structure to address two empirical questions (i) Did the 2019 mega-merger affect Indian depositors? (ii) Do depositors associate with the interest ratios following a mega-merger? The study finds that mega-mergers have a positive effect on acquiring bank depositors. The private benefits given to high-value depositors outweigh the public information provided to average depositors. The study reports that average depositors of acquiring banks are positively associated with interest spread post-mega-merger. High-value depositors do not associate with interest ratios during mega-mergers.

Suggested Citation

  • Narula, Sakshi, 2025. "The impact of mega-mergers on uninsured depositors: Evidence from Indian commercial banks," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001467
    DOI: 10.1016/j.iref.2025.103983
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    More about this item

    Keywords

    Bank risk; Difference in difference; Signalling; Depositor behaviour; Merger;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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