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The Competitive Effect of a Bank Megamerger on Credit Supply

Author

Listed:
  • Henri Fraisse
  • Johan Hombert

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Mathias Ll

Abstract

We study the effect of a merger between two large banks on credit market competition. We identify the competitive effect of the merger using matched loan-level and firm-level data and exploiting variation in the merging banks' market overlap across local lending markets. On the credit market side, we find a reduction in lending, in particular through termination of relationships. In the average market, bank credit decreases by 2.7%. On the real side, firm exit increases by 4%, whereas firms that do not exit and firms that start up experience no adverse real effect on investment and employment.

Suggested Citation

  • Henri Fraisse & Johan Hombert & Mathias Ll, 2016. "The Competitive Effect of a Bank Megamerger on Credit Supply," Working Papers hal-01993387, HAL.
    • Handle: RePEc:hal:wpaper:hal-01993387
    as

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