The Effects of Dynamic Changes in Bank Competition on the Supply of Small Business Credit
Allen N. Berger
University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; Tilburg University - CentER
Lawrence G. Goldberg
University of Miami - Department of Finance
Lawrence J. White
New York University (NYU) - Leonard N. Stern School of Business; Leonard N. Stern School of Business - Department of Economics
European Finance Review, Vol. 5, Iss. 1-2, 2001
We study the effects of structural changes in banking markets on the supply of credit to small businesses. Specifically, we examine whether bank mergers and acquisitions (M&As) and entry have "external" effects on small business loans by other banks in the same local markets. The results suggest modest positive external effects from these dynamic changes in competition, except that large banks may reduce small business lending in reaction to entry. We confirm bank size and age as important determinants of this lending, and show that the measured age effect does not appear to be driven by local market M&A activity.
Keywords: Bank, mergers, small business
JEL Classification: G21, G28, G34, E58, L89Accepted Paper Series
Date posted: November 12, 2001
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