Bank Consolidation and Performance: The Argentine Experience

Author/Editor: Basu, Ritu ; Druck, Pablo ; Marston, David ; Susmel, Raul
Publication Date: August 01, 2004
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: We examine a large panel of more than 100 banks from Argentina to study the effects of bank consolidation on performance between December 1995 and December 2000, a period of heavy bank consolidation and relative calm. Overall, we find a positive and significant effect of bank consolidation on bank performance. Bank returns increase with consolidation, and insolvency risk is reduced. Additionally, the study suggests that mergers and privatizations have a beneficial effect on bank returns. The effects of a bank acquisition on return on equity is, however, negative. Acquisitions do not seem to have any effect on risk-adjusted returns. The study also finds that a bank's insolvency risk is reduced significantly through mergers and privatization and is unrelated to bank acquisitions.
Series: Working Paper No. 04/149
Subject(s): Banking | Argentina | Emerging markets | Bank restructuring | Financial crisis | Privatization | Economic models

Author's Keyword(s): Bank Consolidation | Banking Industry in Emerging Markets | Financial Performance
Publication Date: August 01, 2004
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1492004 Pages: 32
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