Günter Lang, Peter Welzel
Mergers Among German Cooperative Banks
A Panel-based Stochastic Frontier Analysis
Based on an unbalanced panel of all Bavarian cooperative banks for the
years of 1989-95 which includes information on 243 mergers, we analyze
motives for and cost effects of small-scale mergers in German banking.
Estimating a frontier cost function with a time-variable stochastic
efficiency term we show that positive scale and scope effects from a
merger arise only if the merged unit closes part of the former branch
network. When we compare actual mergers to a simulation of hypothetical
mergers, size effects of observed mergers turn out to be slightly more
favorable than for all possible mergers. Banks taken over by others are
less efficient than the average bank in the same size class, but exhibit
on average the same efficiency as the acquiring firms. For the post-merger
phase, our empirical results provide no evidence for efficiency gains from
merging, but point instead to a leveling off of differences among the
merging units.
Keywords: banking, mergers, efficiency
JEL classification: G21, L29
* We are indebted to the Genossenschaftsverband Bayern for providing us
with the data. Financial support from the Raiffeisen/Schulze-Delitzsch
Foundation is gratefully acknowledged.
Contact:
Dr. Günter Lang, Universität Augsburg, wiwi-Fakultät,
D-86135 Augsburg, Germany.
phone +49-821-598-4195, fax +49-821-598-4230,
e-mail guenter.lang@wiwi.uni-augsburg.de.
Juergen Peters,09.09.1997