Bank regulatory size thresholds, merger and acquisition behavior, and small business lending
Christa H.S. Bouwman,
Hu, Shuting (Sophia) and
Shane A. Johnson
Journal of Corporate Finance, 2020, vol. 62, issue C
Size threshold-based regulatory requirements are pervasive in banking, but little is known about how they affect the merger and acquisition (M&A) behavior of banks around the thresholds. M&As cause discrete increases in size, so we hypothesize changes in banks' M&A behavior near regulatory size thresholds and associated real effects (changes in small business lending by the acquiring banks). We develop a novel research design that estimates indirect treatment effects for banks just below the thresholds. We find strong evidence of indirect treatment effects on bank M&A behavior and the small business lending of the merged banks. Our results illustrate the importance of indirect treatment effects in difference-in-differences studies involving size thresholds.
Keywords: Indirect treatment effects; Direct treatment effects; Regulatory size thresholds; Mergers; Acquisitions; Real effects; Dodd-frank act; Regulatory costs (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:62:y:2020:i:c:s092911991830840x
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