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Nowhere Else to Go: The Determinants of Bank-Firm Relationship Discontinuations After Bank Mergers

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  • Oliver Rehbein
  • Santiago Carbo-Valverde

Abstract

The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial for firm performance following bank mergers. We find both competition and the available firm collateral to be important factors in enabling firms to switching banks, instead of dropping their bank relationships. We also provide novel evidence that firms who are able to \textit{add} a bank relationship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank-mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance.

Suggested Citation

  • Oliver Rehbein & Santiago Carbo-Valverde, 2018. "Nowhere Else to Go: The Determinants of Bank-Firm Relationship Discontinuations After Bank Mergers," CRC TR 224 Discussion Paper Series crctr224_2018_044, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_044
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    More about this item

    Keywords

    bank mergers; relationship banking; competition;
    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

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