Quarterly Studies in Banking Management and Islamic Banking

Analyzing Macro Effects of Banks Merger on the Banking System of Iran

Document Type : Original Article

Author

marzieh pirahmadi

Pasargad Bank

https://doi.org/10.22034/jifb.2021.266498.1229
Abstract
The literature related to banks merging less devoted to the macro effects of this mechanism. Indeed, banks merger not only affect micro aspect of banking, such as competition, efficiency and profitability, but also it can influence banking system and therefore macroeconomic goals. Due to this degree of importance, the aim of this research is analyzing macro effects of banks merger on competition degree, optimal reserve holding and liquidity risk at the level of banks and the whole system. In doing so, first, the theory literature of this structure is emphasized where the aspects regarding the relationship between merger with mentioned variables is recognized. Then, a comprehensive model analyzed in order to explaining the relation among variables, and at the end, the movements among merger and these variables is identified. The last part of the paper is trying to investigate recent merger in Iran (Sepah bank with other military banks). By using data for financial year 2018, our results show that these banks not only are far from optimal reserve ratio, but also are face with liquidity risk, and therefore merging them may not lead to a better payoff. However, this result has some restrictions that mentioned in the paper.

Keywords

Banks Merger
Liquidity Risk
Banks Competition Degree
Banks Reserve Management

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