Strategic Bank Consolidations: Intangible Capital Channel

This paper examines how internally generated intangible capital shapes merger patterns and postmerger performance in the U.S. banking sector. We construct a novel measure of intangible capital using granular regulatory expense data and quantify assortative matching between acquirers and targets. Employing a difference-in-differences design with propensity score matching, we causally show that higher assortative matching in intangible capital leads to significant improvements in post-merger bank performance. We complement the empirical analysis with a dynamic search-theoretic model of bank mergers, demonstrating that strategic complementarities in intangibles give rise to assortative matching equilibria. Our findings provide new insights into banking consolidation.