The consolidation process of the banking system: mergers, profitability, and competition, 1994–2000

Three hypotheses are proposed regarding the differences in the profitability of merged banks compared to other banks. The first posits that banks operating in concentrated markets may set prices that are unfavorable to consumers; the second suggests that the exercise of market power would generate high returns, determining a specific structure of the banking market; and the third includes efficiency as a source of differentiation between banks’ returns.