Wednesday, May 23, 2018

The Competitive Effect of a Bank Megamerger on Credit Supply

Hombert, Johan; Fraisse, Henri; and Lé, Mathias discuss The Competitive Effect of a Bank Megamerger on Credit Supply.

ABSTRACT: We study the effect of a merger between two large banks on credit market competition. We identify the competitive effect of the merger using matched loan-level and firm-level data and exploiting variation in the merging banks' market overlap across local lending markets. On the credit market side, we find a reduction in lending, in particular through termination of relationships. In the average market, bank credit decreases by 2.7%. On the real side, firm exit increases by 4%, whereas firms that do not exit and firms that start up experience no adverse real effect on investment and employment.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/05/the-competitive-effect-of-a-bank-megamerger-on-credit-supply.html

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