Bank mergers bring down the neighborhood

A new study published in The Journal of Finance finds that neighborhoods affected by bank consolidation are subject to higher interest rates in the future, diminished local construction, lower real estate prices, and an influx of poorer households. The lack of competitiveness in the local loan markets results in lower commercial real estate investment and a drop in real estate prices. This causes unemployment to rise alongside an influx of lower-income households. Consequently, there is an increase in property crime within the affected neighborhoods.

The article's authors applied their results to the FBI's national crime figures from the Uniform Crime Reports and found, "a mean decline in banking competitiveness due to mergers from 1992 to 1995 is associated with approximately 24,300 more property crime offenses over the period 1995 to 2000."

The poorest neighborhoods are found to suffer the greatest increases in crime following bank mergers. The authors maintain that bank mergers should be carefully regulated to prevent economic deterioration of the affected neighborhoods.


This study is published in the April issue of The Journal of Finance. Media wishing to receive a PDF of this article please contact [email protected]

The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance. For more information on the journal and the American Finance Association, visit

Mark Garmaise, Ph.D. is Assistant Professor of Finance at UCLA Anderson School of Management. He is available for media questions and interviews.

Tobias J. Moskowitz, Ph.D. is Professor of Finance and Neubauer Family Faculty Fellow at the University of Chicago Graduate School of Business.

Blackwell Publishing is the world's leading society publisher, partnering with 665 academic and professional societies. Blackwell publishes over 800 journals and, to date, has published more than 6,000 books, across a wide range of academic, medical, and professional subjects.

Last reviewed: By John M. Grohol, Psy.D. on 30 Apr 2016
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