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Effect of Bank Mergers on Client Firms: Evidence from the Credit Supply Channel

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  • Heather Montgomery
  • Yuki Takahashi

Abstract

This study investigates the effects of bank mergers on client firms. A rich panel of data detailing firm borrowing from individual banks enables controls for demand‐side effects to isolate the effect of bank mergers on the supply of credit. The impact of bank mergers on other firm outcomes (growth in total borrowing, distance to default and investment) is also examined. A merger announcement by a firm's main bank results in a contraction in credit supply from the merging bank. Firms are not able to compensate for the reduced credit supply from the main bank, so overall borrowing also declines.

Suggested Citation

  • Heather Montgomery & Yuki Takahashi, 2018. "Effect of Bank Mergers on Client Firms: Evidence from the Credit Supply Channel," The Japanese Economic Review, Japanese Economic Association, vol. 69(4), pages 438-449, December.
    • Handle: RePEc:bla:jecrev:v:69:y:2018:i:4:p:438-449
    DOI: 10.1111/jere.12157
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    Cited by:

    1. Byung Wook Jun & Sung Man Yoon, 2020. "Foreign Banks Acquisition Strategy and the Business Approach of Domestic Bank: A Case of Standard Chartered Bank," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 861-874, July.
    2. Masanori Orihara & Yoshiaki Ogura & Yue Cai, 2022. "Borrowing in Unsettled Times and Cash Holdings Afterwards," Working Papers 2207, Waseda University, Faculty of Political Science and Economics.
    3. Uchino, Taisuke & Uesugi, Iichiro, 2022. "The effects of a megabank merger on firm-Bank relationships and loan availability☆," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    4. Heather Montgomery, 2022. "Should I Stay or Should I go Now? The Effect of Bank Mergers on Bank–Firm Relationships in Japan," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(3), pages 390-417, June.

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