Location of Repository

How Have Borrowers Fared in Banking Mega-Mergers?

By Kenneth A. Carow, Edward J. Kane and Rajesh Narayanan

Abstract

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-à-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.

OAI identifier:

Suggested articles

Preview

Citations

  1. (1996). Bank information monopolies and the mix of private and public debt claims,”
  2. (1997). Bank underwriting of debt securities:
  3. (2005). Do bank relationships affect the firm’s underwriter choice in the corporate bond underwriting market?”
  4. (1998). EFN The average external finance needs during the last 3 years – based on the method developed by Rajan and Zingales
  5. (2004). Executives See Rise in Tying Loans to
  6. (1998). Financial dependence and growth,”
  7. (2003). Firms and Their Distressed Banks: Lessons from the Norwegian Banking Crises,”
  8. (2004). Gains In Bank Mergers: Evidence from the Bond Markets,”
  9. (2000). Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?”
  10. (1993). Mondetary Policy and Credit Conditions: Evidence from the
  11. (2000). Multiple versus single banking relationships: Theory and evidence,”
  12. (2003). SMEs and Bank Lending Relationships: The Impact of Mergers,” National Bank of Belgium Working Paper.
  13. The difference in means is tested using a t-test, and the difference in medians using a Wilcoxon rank sum test. 04-20-05
  14. (1994). The overall gains from large bank mergers.”
  15. (2004). The role of syndicate structure in bank underwriting”,
  16. (1993). The Value of Bank Durability: Borrowers as Bank Stakeholders,”
  17. (2003). The Value of Banking Relationships During a Financial Crisis: Evidence from
  18. (2002). The Value of Durable Bank Relationships: Evidence from Korean Banking Shocks,”
  19. (2001). Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders.”

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.