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The effects of bank mergers on credit availability: evidence from corporate data

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  • Emilia Bonaccorsi di Patti

    ()
    (Bank of Italy, Economic Research Department)

  • Giorgio Gobbi

    ()
    (Bank of Italy, Economic Research Department)

Abstract

A large literature on the effects of bank consolidation focuses on direct efficiency gains for participating banks and market power effects. The special nature of credit markets suggests that indirect informational effects for borrowers may be generated by bank consolidation. In particular, borrowers that depend on relationship-based lending may face a reduction in credit availability because soft information gets lost if their lenders are involved in a merger. In this study we investigate the full effect of bank mergers on the availability of credit for corporate borrowers by examining a large sample of privately owned firms. We analyze the impact of bank mergers and acquisitions over time on the volume of credit and credit lines, controlling for firms characteristics. Following the literature on investment and financing constraints, we also test whether banking consolidation affects the investment-cash flow sensitivity of firms. We examine in detail the effects of bank mergers and acquisitions on firms that are small, rely on few banks, and have a high credit risk.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 479.

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Date of creation: Jun 2003
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Handle: RePEc:bdi:wptemi:td_479_03

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Keywords: commercial banks; mergers and acquisitions; business lending; investment; financing constraints;

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References

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Citations

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Cited by:
  1. Enrico Beretta & Silvia Del Prete, 2013. "Banking consolidation and bank-firm credit relationships: the role of geographical features and relationship characteristics," Temi di discussione (Economic working papers) 901, Bank of Italy, Economic Research and International Relations Area.
  2. Fabio Ghironi & Viktors Stebunovs, 2010. "The Domestic and International Effects of Interstate U.S. Banking," NBER Working Papers 16613, National Bureau of Economic Research, Inc.
  3. Fabiano Schivardi & Roberto Torrini, 2004. "Firm size distribution and employment protection legislation in Italy," Temi di discussione (Economic working papers) 504, Bank of Italy, Economic Research and International Relations Area.
  4. Fabio Panetta & Fabiano Schivardi & Matthew Shum, 2004. "Do mergers improve information? evidence from the loan market," Proceedings 942, Federal Reserve Bank of Chicago.
  5. Neuberger, Doris & Schacht, Christoph, 2005. "The number of bank relationships of SMEs: A disaggregated analysis for the Swiss loan market," Thuenen-Series of Applied Economic Theory 52, University of Rostock, Institute of Economics.
  6. Doris Neuberger & Christoph Schacht, 2005. "The Number of Bank Relationships of SMEs: A Disaggregated Analysis for the Swiss Loan Market," Finance 0506018, EconWPA.
  7. Christian Schmieder & Katharina Marsch & Katrin Forster-van Aerssen, 2010. "Does banking consolidation worsen firms’ access to credit? Evidence from the German economy," Small Business Economics, Springer, vol. 35(4), pages 449-465, November.
  8. Fabi�n Duarte & Andrea Repetto & Rodrigo O. Vald�s, 2005. "The Effects on Firm Borrowing Costs of Bank M&As," Documentos de Trabajo 206, Centro de Economía Aplicada, Universidad de Chile.
  9. Pietro ALESSANDRINI & Giorgio CALCAGNINI & Alberto ZAZZARO, 2006. "Asset Restructuring Strategies in Bank Acquisitions: Evidence from the Italian Banking Industry," Working Papers 264, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  10. Alessandrini, Pietro & Calcagnini, Giorgio & Zazzaro, Alberto, 2008. "Asset restructuring strategies in bank acquisitions: Does distance between dealing partners matter?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 699-713, May.

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