Staying, Dropping, or Switching: The Impacts of Bank Mergers on Small Firms

National Bank of Belgium Working Paper No. 179

45 Pages Posted: 24 Sep 2010 Last revised: 27 Sep 2010

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Nancy Masschelein

National Bank of Belgium - Department of International Cooperation and Financial Stability

Janet Mitchell

National Bank of Belgium - Department of Financial Stability; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 26, 2009

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.

Keywords: Bank mergers, bank lending relationships, SME loans

JEL Classification: G21, G28, G34

Suggested Citation

Degryse, Hans and Masschelein, Nancy and Mitchell, Janet, Staying, Dropping, or Switching: The Impacts of Bank Mergers on Small Firms (October 26, 2009). National Bank of Belgium Working Paper No. 179. Available at SSRN: https://ssrn.com/abstract=1681482

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nancy Masschelein

National Bank of Belgium - Department of International Cooperation and Financial Stability ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Janet Mitchell

National Bank of Belgium - Department of Financial Stability ( email )

14 Blvd de Berlaimont
B-1000 Brussels
Belgium
+32 2 221 3459 (Phone)
+32 2 221 3104 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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