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

52 Pages Posted: 27 Sep 2021 Last revised: 8 Jul 2022

See all articles by Bernadette Minton

Bernadette Minton

Ohio State University (OSU) - Fisher College of Business

Alvaro G. Taboada

Mississippi State University

Rohan Williamson

Georgetown University

Date Written: September 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.

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Suggested Citation

Minton, Bernadette and Taboada, Alvaro G. and Williamson, Rohan, Bank Mergers, Acquirer Choice and Small Business Lending: Implications for Community Investment (September 2021). NBER Working Paper No. w29284, Available at SSRN: https://ssrn.com/abstract=3931806

Bernadette Minton (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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 Williamson

Georgetown University

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