The effect of mergers and acquisitions on bank efficiency in Greece

Abstract

This paper studies the impact of recent mergers and acquisitions (M&As) on the cost and profit efficiency of banks in Greece. To this end, three methods have been applied: (i) analysis of developments in certain cost and profit indicators and their dispersion for bank groups according to their size; (ii) calculation of cost and profit inefficiency (relative to the best performer); and (iii) analysis of individual cases of M&As in terms of changes in bank costs and profitability relative to banks not involved in M&As. Additionally, the paper assesses the existence of economies of scale and the extent to which they are exploited through M&As. The empirical results indicate that M&As, in particular those involving small banks, had a positive effect on cost and profit efficiency and that scope exists for further improvement in efficiency. Also, M&As helped large banks to exploit economies of scale, which previously were found in small to medium- sized banks.

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