Merger Activity as a Determinant of De Novo Entry into Urban Banking Markets

Seelig, Steven; Critchfield, Tim

doi:10.2139/ssrn.160709

Cited by 25 publications

(34 citation statements)

References 10 publications

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“…Amel and Liang (1997) More recent articles move beyond standard demographic and structural variables to consider the effect of mergers on bank entry. Seelig and Critchfield (2003), Berger et al (2004) and Keeton (2000) focus on the effect of mergers on the creation of new charters in urban markets. Seelig and Critchfield look at entry into over 300 urban markets over 1995-98 and measure entry by the number of new bank and thrift charters.…”

Section: Previous Literaturementioning

confidence: 99%

“…Most other papers define de novo entry by the creation of new charters (e.g., Berger et al, 2004, Seelig andCritchfield, 2003, and10 The Summary of Deposits has been amended with thrift information from the Branch Office Survey collected by the Office of Thrift Supervision. 11 We make two passes at the data because branch identifiers are missing for thrifts and can be inconsistent for banks.…”

Section: Datamentioning

confidence: 99%

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The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

Adams

Amel

2007

SSRN Journal

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The threat of entry is an important factor in the evaluation of the potential competitive effects of proposed mergers and acquisitions. In the evaluation of proposed bank mergers, a high probability of entry, or strong potential competition, is often found to mitigate the potential anticompetitive effect of a proposed horizontal merger. Since the probability of entry is not directly observed for each local market, variables such as income and population growth and past entry are typically used to predict the probability of future entry. This study extends previous research on the determinants of entry into local banking markets. In addition to variables considered by past research, such as market demographic characteristics, branching deregulation and past merger activity, this study considers the effects on future entry of strategic barriers to entry, which are proxied by changes in incumbent branching, the presence of small incumbent firms and market concentration. The analysis uses data that allow a broader definition of entry than that used in most past research. In most of the previous studies, bank entry is defined as the creation of a new banking institution. We show that this definition is problematic and misses all of the entry due to branch network extension by existing banks, which is substantial. Results of our analysis are consistent with past research where past research exists. In addition, we find significant negative relationships between strategic barriers to entry and entry. Assessment of the quantitative significance of the results, however, finds that very large changes in the explanatory variables are needed to cause substantial changes in the probability of entry into banking markets.

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Section: Previous Literaturementioning

confidence: 99%

Section: Datamentioning

confidence: 99%

The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

Adams

Amel

2007

SSRN Journal

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“…Two other empirical findings suggest that a growing amount of credit may be supplied by banks that compete with recently merged banks. First, consolidation increases the likelihood of new entry into a market (Adams and Amel, 2007;Berger and others, 2004;Seelig and Critchfield, 2003;and Keeton, 2000). Second, younger banks tend to make more small business loans than similar, but more mature, institutions (DeYoung, Goldberg, and White, 1999).…”

Section: Bank Sizementioning

confidence: 99%

Recent Trends in Small Business Lending and the Community Reinvestment Act

Mach

Dore

2018

FEDS Notes

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“…Keeton (2000) investigated factors that encourage new bank formation and showed that market size, population growth, per capita income growth, and merger activities have positive effects on new bank formation. Seelig and Critchfield (2003) examined the determinants of de novo entries of banks and thrift institutions and demonstrated that per capita income, population, and in-market mergers affect de novo entries positively, but unemployment rates influence them negatively. Berger et al (2004) indicators and estimated the determinants of these expansions.…”

Section: Literature Reviewmentioning

confidence: 99%

Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

Kondo

Harimaya

2014

J Ind Compet Trade

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In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and the motivations of such banks for doing so, considering the Japanese government's requirements for regional financial institutions to play an active role in stimulating local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures where high-performing companies are active. Therefore, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes by clarifying why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy.Keywords: region-based relationship banking, non-local regional banks, entries into other prefectures, characteristics of regional markets, expanding lending opportunities. JEL Classification: G212

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Merger Activity as a Determinant of De Novo Entry into Urban Banking Markets

Cited by 25 publications

References 10 publications

The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

Recent Trends in Small Business Lending and the Community Reinvestment Act

Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?

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