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Federal Reserve Bank of San Francisco
Working Paper Series
How have borrowers fared in banking mega-mergers?
Kenneth A. Carow
Edward J. Kane
Rajesh P. Narayanan
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-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 capital-constrained firms.


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Kenneth A. Carow & Edward J. Kane & Rajesh P. Narayanan, How have borrowers fared in banking mega-mergers?, Federal Reserve Bank of San Francisco, Working Paper Series 2005-09, 2005.
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Keywords: Bank mergers ; Bank loans
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