Bank mergers and the dynamics ofdeposit interest rates

Despite extensive research interest in the last decade, the banking literature has notreached a consensus on the impact of bank mergers on deposit rates. In particular,results on the dynamics of deposit rates surrounding bank mergers vary substantiallyacross studies. In this paper, we aim for a comprehensive empirical analysis of a bankmerger’s impact on deposit rate dynamics. We base the analysis on a unique datasetcomprising deposit rates of 624 US banks with a monthly frequency for the time period1997-2006. These data are matched with individual bank and local marketcharacteristics and the complete list of bank mergers in the US. The data allow us totrack the dynamics of bank mergers while controlling for the rigidity of the deposit ratesand for a range of merger, bank and local market features. An innovation of our work isthe introduction of an econometric approach of estimating the change of the depositrates given their rigidity....