American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers
American Economic Journal: Microeconomics
vol. 16,
no. 3, August 2024
(pp. 107–33)
Abstract
Antitrust often uses the Herfindahl-Hirschman Index (HHI) for merger screening and review. We argue that HHI-based antitrust policy using predefined markets in the banking industry misses anticompetitive effects that are predicted by the proximity of merging branch networks. Difference-in-differences estimates from thousands of mergers reveal that close-proximity bank acquisitions have harmful effects, including branch closures, even if they fall below the HHI threshold for enforcement. Neither lowering the threshold nor using narrower predefined markets addresses this underenforcement without introducing significant overenforcement and underenforcement of other transactions. However, using a proximity threshold to complement the HHI policy could improve bank antitrust.Citation
Benson, David, Samuel Blattner, Serafin Grundl, You Suk Kim, and Ken Onishi. 2024. "Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers." American Economic Journal: Microeconomics, 16 (3): 107–33. DOI: 10.1257/mic.20220094Additional Materials
JEL Classification
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- K21 Antitrust Law
- L13 Oligopoly and Other Imperfect Markets
- L41 Monopolization; Horizontal Anticompetitive Practices
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