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SMEs and Bank Lending Relationships: the Impact of Mergers

  • 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)

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: https://www.nbb.be/doc/oc/repec/reswpp/wp46.pdf
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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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  1. Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper 2003-123, Tilburg University, Center for Economic Research.
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  17. Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
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  20. Panetta, Fabio & Schivardi, Fabiano & Shum, Matthew, 2005. "Do Mergers Improve Information? Evidence from the Loan Market," CEPR Discussion Papers 4961, C.E.P.R. Discussion Papers.
  21. Focarelli, Dario & Panetta, Fabio & Salleo, Carmelo, 2002. "Why Do Banks Merge?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1047-66, November.
  22. Ongena, Steven & Smith, David C., 2000. "What Determines the Number of Bank Relationships? Cross-Country Evidence," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 26-56, January.
  23. Scott, Jonathan A & Dunkelberg, William C, 2003. " Bank Mergers and Small Firm Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 999-1017, December.
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