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The Impact of Bank Consolidation on Commercial Borrower Welfare

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Author Info
JASON KARCESKI
STEVEN ONGENA
DAVID C. SMITH

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Abstract

We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger-induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship. Copyright 2005 by The American Finance Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2005.00787.x
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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 60 (2005)
Issue (Month): 4 (08)
Pages: 2043-2082
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Handle: RePEc:bla:jfinan:v:60:y:2005:i:4:p:2043-2082

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  4. Kang, Jun-Koo & Stulz, Rene M, 2000. "Do Banking Shocks Affect Borrowing Firm Performance? An Analysis of the Japanese Experience," Journal of Business, University of Chicago Press, vol. 73(1), pages 1-23, January. [Downloadable!] (restricted)
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  12. Joe Peek & Eric S. Rosengren, 1995. "Small business credit availability: how important is size of lender?," Working Papers 95-5, Federal Reserve Bank of Boston. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Erel, Isil, 2007. "The Effect of Bank Mergers on Loan Prices: Evidence from the U.S," Working Paper Series 2006-19, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  2. Jacinto Vidigal da Silva & Miguel Diz, 2005. "Mergers And Acquisitions In The Portuguese Banking Industry: Is It There A Process Of Value Creation?," Finance 0503002, EconWPA. [Downloadable!]
  3. Carletti, Elena & Cerasi, Vittoria & Daltung, Sonja, 2004. "Multiple-Bank Lending: Diversification and Free-Riding in Monitoring," Working Paper Series 165, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
    Other versions:
  4. Hans Degryse & Nancy Masschelein & Janet Mitchell, 2004. "SMEs and Bank Lending Relationships: the Impact of Mergers," Research series 200405-1, National Bank of Belgium. [Downloadable!]
    Other versions:
  5. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank. [Downloadable!]
  6. Kenneth A. Carow & Edward J. Kane & Rajesh P. Narayanan, 2005. "Winners and Losers from Enacting the Financial Modernization Statute," NBER Working Papers 11256, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Campa, Jose M. & Hernando, Ignacio, 2002. "Value creation in European M&As," IESE Research Papers D/471, IESE Business School. [Downloadable!]
  8. Allen N. Berger & Richard J. Rosen & Gregory F. Udell, 2005. "Does Market Size Structure Affect Competition? The Cese of Small Business Lending," CEI Working Paper Series 2005-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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