Effect of Bank Mergers on Client Firms: Evidence from the Credit Supply Channel

Heather Montgomery and Yuki Takahashi
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Heather Montgomery: International Christian University
Yuki Takahashi: Stockholm School of Economics

The Japanese Economic Review, 2018, vol. 69, issue 4, No 5, 438-449

Abstract: Abstract This study investigates the effects of bank mergers on client firms. A rich panel of data detailing firm borrowing from individual banks enables controls for demand-side effects to isolate the effect of bank mergers on the supply of credit. The impact of bank mergers on other firm outcomes (growth in total borrowing, distance to default and investment) is also examined. A merger announcement by a firm’s main bank results in a contraction in credit supply from the merging bank. Firms are not able to compensate for the reduced credit supply from the main bank, so overall borrowing also declines.

Keywords: G21; G34; L14 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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DOI: 10.1111/jere.12157

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