Why do acquiring banks in mergers concentrate in well developed areas? Regional development and M&As in banking

The paper focuses on all mergers and acquisitions (M&As) transactions of regional relevance that occurred in the Italian banking sector between 1995 and 2006. A strong direct effect of regional economic and social characteristics on the concentration of the banking industry in Italy is found, as well as on the agglomeration of acquiring banks in well-developed regions. This effect survives to a number of robustness checks, including controls for banks’ profitability and efficiency, and for their institutional characteristics, indicated by the banking literature as the key factors driving concentration in banking. Possible theoretical explanations supporting the empirical findings are also investigated, and their policy implications are discussed.