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Do mergers improve information? evidence from the loan market
We examine the informational effects of M&As by investigating whether bank mergers improve banks? abilities to screen their borrowers. By exploiting a dataset in which we observe a measure of a borrower?s default risk which the lenders observe only imperfectly, we find evidence of these informational improvements. Mergers lead to a closer correspondence between the default risk of each borrower and the interest rate on its loan: after a merger, risky borrowers experience an increase in the interest rate, while non-risky borrowers enjoy lower interest rates. This finding is robust with respect ...