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The Competitive Effects of a Bank Megamerger on Access to Credit

Henri Fraisse, J. Hombert and Mathias Lé ()

Débats économiques et financiers from Banque de France

Abstract: This paper examines how the merger between two megabanks affects bank concentration and firms' access to credit. We find that in local markets in which the merger leads to a large increase in bank concentration, the merged bank decreases the supply of credit both to existing firms and to new firms. This reduction in credit supply is offset by non-merging banks which expand lending in markets in which the merging banks reduce lending. In some specifications, the substitution effect is strong enough to make the overall effect on credit supply statistically insignificant. Moreover, the substitution effect is at work even for small borrowers, risky borrowers, and new entrants.

Keywords: Competition; Bank Lending. (search for similar items in EconPapers)
JEL-codes: L40 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-com
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