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Bank mergers and lending relationships

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Author Info
Judit Montoriol-Garriga () (Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA 02210, USA.)

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Abstract

This paper analyzes the effects of bank mergers on bank-firm relationships. Using matched bank-firm level data, I find that mergers disrupt lending relationships, specially to small borrowers of target banks. However, I find significant positive effects of mergers for borrowers that continue the lending relationship with the consolidated bank. On average, consolidated banks reduce loan interest rates. The most beneficial mergers from the borrower point of view are those involving two large banks and commercial banks. While the reduction in interest rates is larger when the acquirer and the target have some market overlap, the decline is much smaller when there is a significant increase in local banking market concentration. JEL Classification: G21, G34.

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Publisher Info
Paper provided by European Central Bank in its series Working Paper Series with number 934.

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Length: 56 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ecb:ecbwps:20080934

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Related research
Keywords: Banking consolidation; Lending relationships; Small business lending.;

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  5. Degryse, H.A. & Masschelein, N. & Mitchell, J., 2006. "Staying, Dropping or Switching: The Impacts of Bank Mergers on SMEs," Discussion Paper 2006-034, Tilburg University, Tilburg Law and Economic Center.
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    Other versions:
  7. Maudos, Joaquin, 1998. "Market Structure and Performance in Spanish Banking Using a Direct Measure of Efficiency," Applied Financial Economics, Taylor and Francis Journals, vol. 8(2), pages 191-200, April. [Downloadable!] (restricted)
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  11. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July. [Downloadable!] (restricted)
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  14. Frederick C. Scherr & Heather M. Hulburt, 2001. "The Debt Maturity Structure of Small Firms," Financial Management, Financial Management Association, vol. 30(1), Spring.
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  18. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October. [Downloadable!] (restricted)
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