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SMEs and Bank Lending Relationships: the Impact of Mergers

Author

Listed:
  • 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.

Suggested Citation

  • Hans Degryse & Nancy Masschelein & Janet Mitchell, 2004. "SMEs and Bank Lending Relationships: the Impact of Mergers," Working Paper Research 46, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:200405-1
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp46.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Felicia Omowunmi Olokoyo, 2011. "Determinants of Commercial Banks¡¯ Lending Behavior in Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 2(2), pages 61-72, July.
    3. Geert Langenus, 2006. "Fiscal sustainability indicators and policy design in the face of ageing," Working Paper Research 102, National Bank of Belgium.

    More about this item

    Keywords

    loans; bank mergers; bank relationships; credit register;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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