Smes and Bank Lending Relationships: The Impact of Mergers

41 Pages Posted: 3 Aug 2005

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: May 2005

Abstract

This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyze the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping bank credit. The Belgian financial environment reflects a number of interesting features: high banking sector concentration; 'in-market' mergers with large target banks; importance of large banks in providing external finance to SMEs; and low numbers of bank lending relationships maintained by SMEs. We find that bank mergers generate short-term and longer-term effects on borrowers' probability of losing a lending relationship and on credit availability. Mergers also have heterogeneous impacts across borrower types, including borrowers of acquiring and target banks, borrowers of differing size, borrowers with single versus multiple relationships, and borrowers with differing relationship intensities. Firms borrowing from acquiring banks are less likely to lose their lending relationship, while target bank borrowers are more likely to lose their relationship or see their credit availability harmed. Overlap borrowers - borrowing from two of the merging banks - are less likely to lose their relationship than firms borrowing from only one of the merging banks or firms borrowing from non-merging banks.

Keywords: Bank mergers, bank lending relationships, SME loans

JEL Classification: G21, G32

Suggested Citation

Degryse, Hans and Masschelein, Nancy and Mitchell, Janet, Smes and Bank Lending Relationships: The Impact of Mergers (May 2005). CEPR Discussion Paper No. 5061. Available at SSRN: https://ssrn.com/abstract=775884

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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