The Effects of Bank Mergers and Acquisitions on Small Business Lending

Allen N. Berger
University of South Carolina – Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Anthony Saunders
New York University – Leonard N. Stern School of Business

Joseph M. Scalise
University of Pennsylvania, Wharton School; Bain & Company

Gregory F. Udell
Indiana University – Kelley School of Business – Department of Finance

May 1997

Board of Governors of the Federal Reserve System Finance and Economics Discussion Series No. 1997-28


We examine the effects of bank M&As on small business lending. Our methodology permits empirical analysis of the great majority of U.S. bank M&As since the late 1970s — over 6,000 M&As involving over 10,000 banks (some active banks are counted multiple times). We are the first to decompose the impact of M&As on small business lending into static effects associated with a simple melding of the antecedent institutions and dynamic effects
associated with post-M&A refocusing of the consolidated institution. We are also the first to estimate the reactions of other banks in local markets to M&As. We find that the static effects of consolidation which reduce small business lending are mostly offset by the reactions of other banks in the market, and in some cases also by refocusing efforts of the consolidating
institutions themselves.

The Effects of Bank Mergers and Acquisitions on Small Business Lending

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