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Banking Consolidation and Bank-Firm Credit Relationships: the Role of Geographical Features and Relationship Characteristics

Author

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  • Enrico Beretta
  • Silvia Del Prete

Abstract

Using data on bank credit relationships, the paper shows that after a merger or an acquisition involving two or more banks which had previously jointly financed the same firm, the share of credit granted to the client by the consolidated intermediaries moderately decreases over three years. This does not necessarily imply a reduction of the overall credit granted to the firm, because after mergers and acquisitions the probability of diversifying the mix of lenders increases. A geographical closeness between bank and firm, or a membership of the firm in an industrial district, by reducing information asymmetries and the cost of soft information, seem to mitigate or offset the decrease in the share of credit provided by consolidated banks. By contrast, if a firm is in financial distress or located in the South of Italy, diversification is significantly enhanced.

Suggested Citation

  • Enrico Beretta & Silvia Del Prete, 2013. "Banking Consolidation and Bank-Firm Credit Relationships: the Role of Geographical Features and Relationship Characteristics," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
    • Handle: RePEc:pia:review:v:4:y:2013:i:3:n:1
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    Citations

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    Cited by:

    1. Marinelli, Giuseppe & Nobili, Andrea & Palazzo, Francesco, 2022. "The multiple dimensions of bank complexity: Effects on credit risk-taking," Journal of Banking & Finance, Elsevier, vol. 134(C).
    2. Buono, Ines & Formai, Sara, 2018. "The heterogeneous response of domestic sales and exports to bank credit shocks," Journal of International Economics, Elsevier, vol. 113(C), pages 55-73.
    3. Silvia Del Prete & Cristina Demma & Iconio Garrì & Marco Piazza & Giovanni Soggia, 2022. "The heterogeneous effects of bank mergers and acquisitions on credit to firms: evidence from Italian macro-regions," Temi di discussione (Economic working papers) 1382, Bank of Italy, Economic Research and International Relations Area.
    4. Ines Buono & Sara Formai, 2019. "Bank credit, liquidity and firm-level investment: are recessions different?," Temi di discussione (Economic working papers) 1239, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    relationship banking; mergers and acquisitions; firms’ agglomerations;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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