-
How Have Borrowers Fared in Banking Megamergers?
- Journal of Money, Credit, and Banking
- The Ohio State University Press
- Volume 38, Number 3, April 2006
- pp. 821-836
- 10.1353/mcb.2006.0039
- Article
- Additional Information
Previous studies of event returns surrounding bank mergers show that banks gain value in megamergers and additional value when they absorb in-market competitors. A portion of these gains has been traced to the increased bargaining power of banks vis-à-vis regulators and other competitors. We demonstrate that increased bargaining power of megabanks adversely affects loan customers of the acquired institution.Wealth losses are greater when loan customers are credit-constrained, the loan customer is smaller, or the acquisition is an in-market deal. These findings reinforce complaints that the ongoing consolidation in banking has unfavorably affected the availability of credit for smaller firms and especially capitalconstrained firms.