Do mergers improve information? Evidence from the loan market

Fabio Panetta (), Fabiano Schivardi and Matthew Shum ()
Additional contact information
Fabio Panetta: Banca d'Italia
Matthew Shum: Johns Hopkins University

No 521, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We examine the informational effects of M&As by investigating whether bank mergers improve banks' ability to screen borrowers. By exploiting a dataset in which we observe a measure of a borrower's default risk that the lenders observe only imperfectly, we find evidence of these informational improvements. Mergers lead to a closer correspondence between interest rates and individual default risk: after a merger, risky borrowers experience an increase in the interest rate, while non-risky borrowers enjoy lower interest rates. This finding is robust with respect to a series of alternative explanations. Further results suggest that these information benefits derive from improvements in information processing resulting from the merger, rather than from explicit information sharing on individual customers among the merging parties.

Keywords: mergers; asymmetric information; banking (search for similar items in EconPapers)
JEL-codes: G21 L15 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-com, nep-fin, nep-fmk and nep-ind
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Do Mergers Improve Information? Evidence from the Loan Market (2009)
Journal Article: Do Mergers Improve Information? Evidence from the Loan Market (2009)
Working Paper: Do Mergers Improve Information? Evidence from the Loan Market (2005)
Working Paper: Do mergers improve information? evidence from the loan market (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_521_04

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