Are Mergers Responsible for the Surge in New Bank Charters

Abstract

This article reexamines the relationship between mergers and new bank charters, distinguishing more carefully than the other two studies between different types of mergers. The results, based on data for the second half of the 1990s, provide strong support for the view that mergers encourage the formation of new banks. Specifically, the article finds that markets with more merger activity experienced higher rates of new bank formation, and that the mergers with the strongest link to new bank formation were those in which small banks were taken over by large banks or local banks by distant banks.