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In this paper we investigate the performance of the Austrian banks which have participated in a domestic in-market merger operation since 1996. For this purpose we apply the Data Envelopment Analysis (DEA) methodology in combination with a Tobit model to account for the variation of the productive efficiency scores due to external determinants such as in-market merger operations. In order to cope with the problem of selectivity we estimate the model subject to the presence (or absence) of a treatment effect as encompassed by the participation in in-market merger activities. The dataset used comprises an unbalanced panel of data of about 800 Austrian banks ranging over 1996 to 2002. The paper finds evidence supporting the view that banks which participated in domestic in-market merger operations attain a higher productive efficiency level than banks which did not participate in such operations. The analysis also indicates that the merger gains remain significant over a longer period of time (more than five years) but show a slight tendency to level off.
