This article designs a framework for evaluating the causes, consequences, and future implications of financial services industry consolidation, reviews the extant research literature within the context of this framework (over 250 references), and suggests fruitful avenues for future research. The evidence is consistent with increases in market power from some types of consolidation; improvements in profit efficiency and diversification of risks, but little or no cost efficiency improvements on average; relatively little effect on the availability of services to small customers; potential improvements in payments system efficiency; and potential costs on the financial system from increasing systemic risk or expanding the financial safety net. JEL classification codes: G21, G28, G34, E58, L89 Key words: Banks, Mergers, Payments, Small business The opinions expressed do not necessarily reflect those of the Federal Reserve Board, the New York Reserve Bank, or their staffs. We thank Bob ...

The views expressed are those of the author and do not necessarily reflect the position of the Consolidation is a prominent development in the U.S. banking industry, with the number of banks declining from 14,407 to 9,822 between 1980 and 1995. One possible impact on bank customers from banking consolidation could stem from the disruption of historical lending patterns. A lack of short-run substitutes for bank credit would imply that a disruption in the

Abstract: This paper revisits the topic of relative performance evaluation (RPE) of top management using a large panel of community banks. We show that penalizing executives for poor performance arising from economic downturns is not necessarily inconsistent with the theory. Our empirical results indicate that weak downturn-linked performance is strongly related to increased executive turnover. Furthermore, this relationship is more pronounced in bettergoverned banks, which are more likely to engage in value-enhancing disciplinary actions. Our analysis suggests that executive dismissals during adverse economic conditions are not necessarily a result of bad luck; rather, the analysis implies that bad times are informative about management quality. 2 I.

Abstract: This paper revisits the topic of relative performance evaluation (RPE) of top management using a large panel of community banks. We show that penalizing executives for poor performance arising from economic downturns is not necessarily inconsistent with the theory. Our empirical results indicate that weak downturn-linked performance is strongly related to increased executive turnover. Furthermore, this relationship is more pronounced in bettergoverned banks, which are more likely to engage in value-enhancing disciplinary actions. Our analysis suggests that executive dismissals during adverse economic conditions are not necessarily a result of bad luck; rather, the analysis implies that bad times are informative about management quality. 2 I.