Bank Mergers, Acquirer Choice and Small Business Lending: Implications for Community Investment

52 Pages Posted: 3 Jun 2020 Last revised: 23 Sep 2021

See all articles by Bernadette A. Minton

Bernadette A. Minton

Ohio State University (OSU) - Department of Finance

Alvaro G. Taboada

Mississippi State University

Rohan Williamson

Georgetown University - McDonough School of Business

Date Written: August 31, 2021

Abstract

We examine the effects of bank merger and local market characteristics on local small business lending. Mergers involving small, in-state acquirers are positively associated with small business loan (SBL) originations in counties where target banks are located. Conversely, mergers involving large, out-of-state acquirers are associated with fewer SBL originations. The analysis suggests that the results are driven by acquirer’s choice of target. Small and in-state acquirers target banks that focus more on SBL and targets with strong relationships while large, out-of-state acquirers pursue better performing banks with stronger balance sheets and less focus on SBL. Results are particularly strong in counties with a large number of small firms. Post-merger activity supports banks expanding on their acquisition strategy decisions. The findings suggest that acquirer strategy is important for evaluating the impact of acquisitions on local community development and that one-size-fits-all policy solutions for bank mergers may not produce common local outcomes.

Keywords: Bank mergers, acquirer strategy, small business loans, community investment and small and community banks

JEL Classification: G20, G21, G34, O16

Suggested Citation

Minton, Bernadette A. and Taboada, Alvaro G. and Williamson, Rohan G., Bank Mergers, Acquirer Choice and Small Business Lending: Implications for Community Investment (August 31, 2021). Fisher College of Business Working Paper No. 2020-03-012, Charles A. Dice Working Paper No. 2020-12, Georgetown McDonough School of Business Research Paper No. 3611721, Available at SSRN: https://ssrn.com/abstract=3611721 or http://dx.doi.org/10.2139/ssrn.3611721

Bernadette A. Minton (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-3125 (Phone)
614-292-2359 (Fax)

Alvaro G. Taboada

Mississippi State University ( email )

310-H McCool Hall
PO Box 9580
Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

Rohan G. Williamson

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2284 (Phone)
202-687-4031 (Fax)

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