Wall of Main Bank: Bank Megamerger and Lending Adjustment

Yusuke Imani and Koutaroh Minami

No G-1-29, Working Paper Series from Hitotsubashi University Center for Financial Research

Abstract: In a financial system where the bank loan share ranking in a firm’s borrowing portfolio holds strategic importance, changes in ranking due to bank mergers can incur additional costs for firms and banks. Using a large megabank merger in the 2000s, we find that (1) merged bank adjusts lending volume downward after the merger to avoid being top loan share ranking, but (2) this reduction does not harm the firm’s investment and funding since the top share bank at the pre-merger increases its lending. Based on the findings of the lending adjustment by the merged bank, we employ a fuzzy bunching estimator to quantify the net adjustment costs, reaching up to 4.5% of the profit on the margin. Our results reveal a new mechanism by which bank mergers generate costs and who bears those costs.

Keywords: Bank merger; Main bank; Borrowing portfolio; Bunching estimator (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2025-05
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hcfrwp:g-1-29

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