In this study the effect of bank mergers on the most recent attempt to obtain financing from a sample U.S. small firms in the mid-1990s is examined. Banking mergers, which affected about 25% of the firms responding to the survey, had no significant effect on the ability of small firms to obtain a loan or the contract loan rate on the most recent loan from a commercial bank. However, the incidence of mergers does appear to increase nonprice loan terms, increase the incidence of related fees for services, raise the frequency of searching for a new bank, and result in deterioration of service quality Little evidence is found that the most informationally opaque firms (e.g., the smallest firms) bear a higher cost from mergers than do less informationally opaque firms.
This article investigates the short-term and long-term effects of bank market power on the availability of credit for companies, and on firm investment. Our results suggest that an increase in bank market power reduces firms’ credit availability and investment in the short-term, but firm investment recovers in the long-term. The economic significance of these relationships is found to be larger for SMEs than for other (larger) firms.
Using a unique sample of commercial loans and mergers between large banks, we provide microlevel (within-county) evidence linking credit conditions to economic development and find a spillover effect on crime. Neighborhoods that experienced more bank mergers are subjected to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years. The elasticity of property crime with respect to merger-induced banking concentration is 0.18. We show that these results are not likely due to reverse causation, and confirm the central findings using state branching deregulation to instrument for bank competition.