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How Have Borrowers Fared in Banking Megamergers?

  • Carow, Kenneth A.
  • Kane, Edward J.
  • Narayanan, Rajesh P.

Previous studies of event returns surrounding bank mergers show that banks gain value in megamergers and additional value when they absorb in-market competitors. A portion of these gains has been traced to the increased bargaining power of banks vis-a-vis regulators and other competitors. We demonstrate that increased bargaining power of megabanks adversely affects loan customers of the acquired institution. Wealth losses are greater when loan customers are credit-constrained, the loan customer is smaller, or the acquisition is an in-market deal. These findings reinforce complaints that the ongoing consolidation in banking has unfavorably affected the availability of credit for smaller firms and especially capital-constrained firms.

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File URL: http://dx.doi.org/10.1353/mcb.2006.0039
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 38 (2006)
Issue (Month): 3 (April)
Pages: 821-836

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Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:3:p:821-836
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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