DO SUBSTANTIAL HORIZONTAL MERGERS GENERATE SIGNIFICANT PRICE EFFECTS - EVIDENCE FROM THE BANKING INDUSTRY

This study examines the price effects of recent US bank mergers that s ubstantially increased local market concentration. Using the deposit i nterest rates that banks offer their customers as our price measure, w e find that, over the 1991-94 time period, deposit rates offered by pa rticipants in substantial horizontal mergers and their local market ri vals declined by a greater percentage than did deposit rates offered b y banks not operating in markets in which such mergers took place. We interpret our results as evidence that these mergers led to increased market power.