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How Have Borrowers Fared in Banking Megamergers?

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  • Carow, Kenneth A.
  • Kane, Edward J.
  • Narayanan, Rajesh P.

Abstract

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-a-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 capital-constrained firms.

Suggested Citation

  • Carow, Kenneth A. & Kane, Edward J. & Narayanan, Rajesh P., 2006. "How Have Borrowers Fared in Banking Megamergers?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 821-836, April.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:3:p:821-836
    DOI: 10.1353/mcb.2006.0039
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