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SMEs and Bank Lending Relationships: the Impact of Mergers

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Author Info

  • Hans Degryse

    ()
    (University of Leuven
    Tilburg University)

  • Nancy Masschelein

    ()
    (National Bank of Belgium, Department of International Cooperation and Financial Stability)

  • Janet Mitchell

    ()
    (National Bank of Belgium, Department of International Cooperation and Financial Stability)

Abstract

This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyse the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping bank credit. The environment reflects a number of interesting features: high banking sector concentration; \u201Cin-market\u201D mergers with large target banks; importance of large banks in providing external finance to SMEs; and low numbers of bank lending relationships maintained by SMEs. We find that bank mergers generate short-term and longer-term effects on borrowers' probability of losing a lending relationship. Mergers also have heterogeneous impacts across borrower types, including borrowers of acquiring and target banks, borrowers of differing size, and borrowers with single versus multiple relationships. Firms borrowing from acquiring banks are less likely to lose their lending relationship, while target bank borrowers are more likely to lose their relationship. Firms borrowing from two of the merging banks are less likely to lose their relationship than firms borrowing from only one of the merging banks or firms borrowing from nonmerging banks.

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File URL: http://www.nbb.be/doc/oc/repec/reswpp/WP46.pdf
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Bibliographic Info

Paper provided by National Bank of Belgium in its series Working Paper Research with number 46.

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Length: 44 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:nbb:reswpp:200405-1

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Keywords: loans; bank mergers; bank relationships; credit register;

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  1. Degryse, Hans & Van Cayseele, Patrick, 2000. "Relationship Lending within a Bank-Based System: Evidence from European Small Business Data," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 90-109, January.
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Citations

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Cited by:
  1. BEUSELINCK, Christof & DELOOF, Marc & VANSTRAELEN, Ann, 2011. "Corporate governance and cash policies of multinational corporations," Working Papers 2011020, University of Antwerp, Faculty of Applied Economics.
  2. 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.
  3. Carletti, Elena & Cerasi, Vittoria & Daltung, Sonja, 2007. "Multiple-bank lending: Diversification and free-riding in monitoring," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 425-451, July.
  4. Thorsten Beck & Hans Degryse & Ralph de Haas & Neeltje van Horen, 2014. "When Arm's Length Is Too Far. Relationship Banking over the Business Cycle," CESifo Working Paper Series 4877, CESifo Group Munich.
  5. Claessens, Stijn, 2006. "Competitive implications of cross-border banking," Policy Research Working Paper Series 3854, The World Bank.
  6. 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.
  7. Stijn Claessens, 2009. "Competition in the Financial Sector," IMF Working Papers 09/45, International Monetary Fund.
  8. Lev Ratnovski, 2013. "Competition Policy for Modern Banks," IMF Working Papers 13/126, International Monetary Fund.

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