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SMEs and Bank Lending Relationships: the Impact of Mergers

Hans Degryse (), Nancy Masschelein () and Janet Mitchell ()
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Nancy Masschelein: National Bank of Belgium, Department of International Cooperation and Financial Stability
Janet Mitchell: National Bank of Belgium, Department of International Cooperation and Financial Stability

No 46, Working Paper Research from National Bank of Belgium

Abstract: This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyse the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping bank credit. The environment reflects a number of interesting features: high banking sector concentration; \u201Cin-market\u201D mergers with large target banks; importance of large banks in providing external finance to SMEs; and low numbers of bank lending relationships maintained by SMEs. We find that bank mergers generate short-term and longer-term effects on borrowers' probability of losing a lending relationship. Mergers also have heterogeneous impacts across borrower types, including borrowers of acquiring and target banks, borrowers of differing size, and borrowers with single versus multiple relationships. Firms borrowing from acquiring banks are less likely to lose their lending relationship, while target bank borrowers are more likely to lose their relationship. Firms borrowing from two of the merging banks are less likely to lose their relationship than firms borrowing from only one of the merging banks or firms borrowing from nonmerging banks.

Keywords: loans; bank mergers; bank relationships; credit register (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004-05
New Economics Papers: this item is included in nep-acc and nep-cfn
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Working Paper: SMEs and Bank Lending Relationships: The Impact of Mergers (2005) Downloads
Working Paper: SMEs and bank lending relationships: the impact of mergers (2005)
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