Market Power, Bank Megamergers, And the Welfare of Bank Borrowers

36 Pages Posted: 5 Oct 2010 Last revised: 19 Dec 2011

Donald R. Fraser

Texas A&M University - Department of Finance

James W. Kolari

Texas A&M University, Department of Finance

Seppo Pynnonen

University of Vaasa, Department of Mathematics and Statistics

T. Kyle Tippens

Abilene Christian University - College of Business Administration

Date Written: October 4, 2010

Abstract

We assess the effects on the welfare of corporate borrowers of the recent wave of bank consolidations in the United States that has produced a small number of very large banks. Our evidence from a sample of more than 3,000 commercial borrowers from banks involved in large mergers indicates that the wealth effects on these borrowers are highly negative, statistically significant, and economically important. These negative investor perceptions seem to be driven largely by the expectation of changes in banks’ market power resulting from the mergers.

Keywords: Bank megamergers, bank mergers, market power

JEL Classification: G14, G21, G28, G34

Suggested Citation

Fraser, Donald R. and Kolari, James W. and Pynnonen, Seppo and Tippens, T. Kyle, Market Power, Bank Megamergers, And the Welfare of Bank Borrowers (October 4, 2010). Journal of Financial Research, Vol. 34, pp. 641-658; Mays Business School Research Paper No. 2011-8. Available at SSRN: https://ssrn.com/abstract=1687312

Donald R. Fraser (Contact Author)

Texas A&M University - Department of Finance ( email )

430 Wehner
College Station, TX 77843-4218
United States
979-845- 2020 (Phone)

James W. Kolari

Texas A&M University, Department of Finance ( email )

MS-4218
Department of Finance
College Station, TX TX 77843-4218
United States
979-845-4803 (Phone)
979-845-3884 (Fax)

Seppo Pynnonen

University of Vaasa, Department of Mathematics and Statistics ( email )

Wolffintie 34
65200 Vaasa
Finland
+358-21-449 8311 (Phone)

HOME PAGE: http://www.uva.fi/~sjp/

T. Kyle Tippens

Abilene Christian University - College of Business Administration ( email )

ACU Box 29333
Abilene, TX 79699
United States
(325) 674-4947 (Phone)
(325) 674-2564 (Fax)

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