DO MERGERS IMPROVE THE X-EFFICIENCY AND SCALE EFFICIENCY OF US BANKS - EVIDENCE FROM THE 1980S

A central issue currently debated among bank analysts and economists i s whether mergers enhance the efficiency of surviving banks. This pape r investigates the postmerger performance of acquiring banks that part icipated in a merger during the period 1980-90. The evidence suggests that acquirers failed to improve X-efficiency after the merger. Acquir ing banks, however, experienced moderate gains in scale efficiency rel ative to a control sample. The second part of the paper uses regressio n analysis to identify factors influencing the performance of merging banks. The regression results suggest that improvements in postmerger performance depend on the ability of the bank to strengthen asset qual ity. we find no evidence to support the theory that in-market mergers lead to significant improvements in efficiency.