This study investigates the productivity effects of bank mergers and acquisitions (M&As) within the European Union (EU) from a causal perspective. As the banking sector in the EU continues to undergo significant consolidation, understanding the implications of these structural changes on productivity is crucial for policymakers, investors, and stakeholders. The primary objective of this research is to assess whether and to what extent M&As influence the productivity of banks operating in the EU.

We employ a robust econometric framework to analyze data from a comprehensive sample of EU banks over the past two decades. By leveraging a difference-in-differences approach combined with propensity score matching, we aim to isolate the causal effects of M&As on bank productivity. This methodology allows us to control for confounding factors and ensure that the observed impacts are attributable to the mergers and acquisitions themselves rather than external influences.

Our findings indicate that M&As have a heterogeneous impact on bank productivity across different EU countries and bank sizes. On average, we observe a positive effect on productivity in the post- merger period, driven primarily by increased operational efficiencies and economies of scale.

Larger banks, in particular, tend to experience more pronounced productivity gains compared to their smaller counterparts. This suggests that scale economies and resource optimization play a significant role in enhancing productivity following M&As.

However, the study also uncovers variability in outcomes based on the type of merger and the specific banking markets involved. For instance, mergers involving cross-border transactions or consolidation within highly competitive markets demonstrate different productivity effects.

Additionally, the short-term improvements in productivity may not always translate into long-term sustainable gains, as integration challenges and market dynamics can offset initial benefits.

The implications of these findings are multifaceted. For regulators and policymakers, understanding the productivity implications of M&As can inform decisions related to market concentration and competition. For banks, the results highlight the importance of strategic planning and effective integration processes to realize the potential productivity benefits of M&As.

Bank mergers, bank acquisitions, productivity effects

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