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Staying, Dropping, or Switching: The Impacts of Bank Mergers on Small FirmsHans DegryseKU Leuven - Faculty of Business and Economics (FBE); Centre for Economic Policy Research (CEPR); CentER, European Banking Center (EBC), TILEC, Tilburg University Nancy MasscheleinNational Bank of Belgium - Department of International Cooperation and Financial Stability Janet MitchellNational Bank of Belgium - Department of Financial Stability; Centre for Economic Policy Research (CEPR) October 26, 2009 National Bank of Belgium Working Paper No. 179 Abstract: 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, G34 Accepted Paper SeriesDate posted: September 24, 2010 ; Last revised: September 27, 2010Suggested CitationContact Information
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