Gauging the efficiency of bank consolidation during a merger wave

By many measures, bank consolidation waves, historically and currently, pro duce substantial efficiency gains associated with reduced operating costs, enhanced diversification, and the enrichment of bank-customer relationships . These gains may be hard to discover in panel or cross-sectional analyses of individual banks because merger waves pose special econometric pitfalls for event studies of stock returns and bank performance comparisons. We rev iew these problems and summarize lessons from nine case studies of individu al merger transactions which offer qualitative evidence that potential econ ometric pitfalls can be important. Those conclusions suggest placing greate r weight on cross-regime comparisons for measuring gains during bank merger waves. (C) 1999 Elsevier Science B.V. All rights reserved.