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Staying, Dropping, or Switching: The Impacts of Bank Mergers on Small Firms

Hans Degryse1,2; Nancy Masschelein3; Janet Mitchell1,3

1 Centre for Economic Policy Research · 2 KU Leuven · 3 National Bank of Belgium

Review of Financial Studies 2011 open access

Assessing the impacts of bank mergers on small firms requires separating borrowers with single versus multiple banking relationships and distinguishing the three alternatives of "staying," "dropping," and "switching" of relationship. Single-relationship borrowers who "switch" to another bank following a merger will be less harmed than those whose relationship is "dropped" and not replaced. Using Belgian data, we find that single-relationship borrowers of target banks are more likely than other borrowers to be dropped. We track post-merger performance and show that many dropped target-bank borrowers are harmed by the merger. Multiple-relationship borrowers are less harmed, as they can better hedge against relationship discontinuations

DOI
10.1093/rfs/hhp126
Volume
24 (4)
Pages
1102-1140
Language
en
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