The Effects of Bank Mergers and Acquisitions on Small Business Lending

Abstract

We examine the effects of bank M&As on small business lending. Our methodology permits empirical analysis of the vast majority of U.S. bank M&As since the late 1970s -- over 6,000 M&As involving over 10,000 banks (some active banks are counted multiple times). We are the first to decompose the impact of M&As on small business lending into static effects associated with a simple melding of the antecedent institutions and dynamic effects associated with post-M&A refocusing of the consolidated institution. We are also the first to estimate the reactions of other banks in local markets to M&As. We find that the static effects of consolidation which reduce small business lending are mostly offset by the reactions of other banks in the amrket, and in some cases also by refocusing efforts of the consolidating institutions themselves.