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The competitive effect of a bank megamerger on credit supply

Henri Fraisse, Johan Hombert and Mathias Lé ()

Journal of Banking & Finance, 2018, vol. 93, issue C, 151-161

Abstract: We study the effect of a merger between two large banks on credit market competition. We identify the competitive effect of the merger using matched loan-level and firm-level data and exploiting variation in the merging banks’ market overlap across local lending markets. On the credit market side, we find a reduction in lending, in particular through termination of relationships. In the average market, bank credit decreases by 2.7%. On the real side, firm exit increases by 4%, whereas firms that do not exit and firms that start up experience no adverse real effect on investment and employment.

Keywords: Bank mergers; Megabanks; Credit supply; SMEs (search for similar items in EconPapers)
Date: 2018
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Working Paper: The Competitive Effect of a Bank Megamerger on Credit Supply (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:93:y:2018:i:c:p:151-161

DOI: 10.1016/j.jbankfin.2018.06.011

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