Bank Mergers and Deposit Rate Rigidity

Abstract

In this paper, I empirically explore the relation between bank mergers and the rigidity of banks' deposit rates. I find that merging banks are more likely to change their deposit rates in the first months following a merger. However, in the long term, merging banks change their deposit rates less frequently than non-merging banks. This finding is particularly true after mergers with large target banks and after mergers with a substantial geographical expansion of the bank's operations. The documented post-merger deposit rate rigidity has important implications for the evaluation of merger effects in the context of anti-trust and monetary policies.