Staying, Dropping, or Switching: The Impacts of Bank Mergers on Small Firms
KU Leuven - Faculty of Business and Economics (FBE); Centre for Economic Policy Research (CEPR); CentER, European Banking Center (EBC), TILEC, Tilburg University
National Bank of Belgium - Department of International Cooperation and Financial Stability
National Bank of Belgium - Department of Financial Stability; Centre for Economic Policy Research (CEPR)
October 26, 2009
National Bank of Belgium Working Paper No. 179
Assessing the impacts of bank mergers on small firms requires separating borrowers with single versus multiple banking relationships and distinguishing the three alternatives of "staying," "dropping," and "switching" of relationship. Single-relationship borrowers who "switch" to another bank following a merger will be less harmed than those whose relationship is "dropped" and not replaced. Using Belgian data, we find that single-relationship borrowers of target banks are more likely than other borrowers to be dropped. We track post-merger performance and show that many dropped target-bank borrowers are harmed by the merger. Multiple-relationship borrowers are less harmed, as they can better hedge against relationship discontinuations.
Number of Pages in PDF File: 45
Keywords: Bank mergers, bank lending relationships, SME loans
JEL Classification: G21, G28, G34Accepted Paper Series
Date posted: September 24, 2010 ; Last revised: September 27, 2010
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