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 substantially increased local market concentration. Using the deposit interest rates that banks offer their customers as our price measure, we find that, over the 1991-94 time period, deposit rates offered by participants in substantial horizontal mergers and their local market rivals declined by a greater percentage than did deposit rates offered by 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.