The Dynamics of Market Entry: The Effects of Mergers and Acquisitions on Entry in the Banking Industry

Abstract

We study the dynamics of market entry following mergers and acquisitions (M&As) using banking industry data. The findings suggest that M&As are associated with significant subsequent increases in the probability of entry and may explain more than 20% of entry in metropolitan markets, and more than 10% of entry in rural markets. These findings also suggest that entry may be part of an ?external? effect of M&As that helps supply credit to some relationship-dependent small business borrowers. Our results are robust to use of alternative econometric methods, changes in specifications of the exogenous variables, and alteration of the data samples.

Note: Previous title: The Dynamics of Market Entry: The Effects of Mergers and Acquisitions on De Novo Entry and Small Business Lending in the Banking Industry

Keywords: Entry, Bank, Mergers

JEL Classification: G21, G28, G34, E58, L89