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BANK MERGERS AND ACQUISITIONS – AN EVALUATION OF THE ‘FOUR PILLARS’ POLICY IN AUSTRALIA

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  • doi: 10.1111/j.1467-8454.2008.00337.x

  • The research carried out in this paper was conducted when the author was working at Deakin University. The author's current post is at the Australian Competition and Consumer Commission (ACCC). The views expressed in the paper are those of the author and do not necessarily reflect the views of the ACCC.

Australian Competition and Consumer Commission, GPO Box 520, Melbourne Vic 3001. su.wu@accc.gov.au.

Abstract

This paper examines the efficiency consequences of bank mergers and acquisitions with particular reference to the ‘four pillars’ policy preventing mergers among the four major banks. Using data envelopment analysis, the technical efficiencies of banks operating in Australia over the period from 1983 to 2001 are estimated. A second-stage regression is used to evaluate ex-post efficiency performance of banks involved in mergers and acquisitions. The empirical results demonstrate that for the time being mergers among the four major banks may result in much poorer efficiency performance in the merging banks and the banking sector.

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