The dynamics of market entry: the effects of mergers and acquisitions on do novo entry and small business lending in the banking industry

Berger, Allen N.; Bonime, Seth D.; Goldberg, Lawrence G.; White, Lawrence J.

Working Paper

The dynamics of market entry: the effects of mergers and acquisitions on do novo entry and small business lending in the banking industry

Abstract: We study the dynamics of market entry following mergers and acquisitions (M&As) and the behavior of recent entrants in supplying output that might be withdrawn by the consolidating firms. The data, drawn from the banking industry, suggest that M&As are associated with subsequent increases in the probability of entry. The estimates suggest that M&As explain more than 20% of entry in metropolitan markets and more than 10% of entry in rural markets. Additional results suggest that bank age has a strong negative effect on the small business lending of small banks but that M&As have little influence on this lending.

Keywords: Bank loans; Small business; Bank mergers;