How Have Borrowers Fared in Banking Megamergers?

Kenneth A. Carow, Edward Kane and Rajesh P. Narayanan

Journal of Money, Credit and Banking, 2006, vol. 38, issue 3, 821-836

Abstract: Previous studies of event returns surrounding bank mergers show that banks gain value in megamergers and additional value when they absorb in-market competitors. A portion of these gains has been traced to the increased bargaining power of banks vis-a-vis regulators and other competitors. We demonstrate that increased bargaining power of megabanks adversely affects loan customers of the acquired institution. Wealth losses are greater when loan customers are credit-constrained, the loan customer is smaller, or the acquisition is an in-market deal. These findings reinforce complaints that the ongoing consolidation in banking has unfavorably affected the availability of credit for smaller firms and especially capital-constrained firms.

Date: 2006
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Related works:
Working Paper: How have borrowers fared in banking mega-mergers? (2005)
Working Paper: How Have Borrowers Fared in Banking Mega-Mergers? (2003)
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