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What’s Happened at Divested Bank Offices? An Analysis of Antitrust Divestitures in Bank Mergers in the U.S

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  • Steven Pilloff

    (Hood College, U.S.A.)

Abstract

In their competitive analysis of proposed bank mergers, the Board of Governors of the Federal Reserve System, the U.S. Department of Justice, and other U.S. banking agencies accept branch divestitures as an antitrust remedy in local markets where there is substantial overlap between the acquirer and target. The results of this study, which examines the performance of 751 branches that were divested between June 1989 and June 1999 in conjunction with a merger in the U.S. that raised possible competition issues, are consistent with the policy of accepting branch divestitures as an antitrust remedy being successful. Divested branches operate for lengths of time that are comparable to all branches, and even though they experience substantial deposit runoff around the time of the merger, divested branches subsequently exhibit deposit growth rates that are comparable to those of other similar branches

Suggested Citation

  • Steven Pilloff, 2005. "What’s Happened at Divested Bank Offices? An Analysis of Antitrust Divestitures in Bank Mergers in the U.S," Multinational Finance Journal, Multinational Finance Journal, vol. 9(1-2), pages 43-71, March-Jun.
    • Handle: RePEc:mfj:journl:v:9:y:2005:i:1-2:p:43-71
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    References listed on IDEAS

    as
    1. Allen N. Berger & Timothy H. Hannan, 1998. "The Efficiency Cost Of Market Power In The Banking Industry: A Test Of The "Quiet Life" And Related Hypotheses," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 454-465, August.
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    4. Jim Burke, 1998. "Divestiture as an antitrust remedy in bank mergers," Finance and Economics Discussion Series 1998-14, Board of Governors of the Federal Reserve System (U.S.).
    5. Steven Pilloff & Stephen Rhoades, 2002. "Structure and Profitability in Banking Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(1), pages 81-98, February.
    6. Steven Pilloff, 1999. "Multimarket Contact in Banking," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(2), pages 163-182, March.
    7. Charles M. Kahn & George Pennacchi & Ben Sopranzetti, 2000. "Bank consolidation and consumer loan interest rates," Proceedings 690, Federal Reserve Bank of Chicago.
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    9. Robin A. Prager & Timothy H. Hannan, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence From The Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-452, December.
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    Cited by:

    1. Petkov, Ivan, 2023. "Small business lending and the bank-branch network," Journal of Financial Stability, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    divestiture; bank merger; antitrust policy and remedy; competition;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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