The Effects of Bank Mergers and Acquisitions on Small Business Lending

Abstract

We examine the effects of bank M&As on small business lending using data on over 6,000 recent U.S. bank M&As. We are the first to decompose the impact of M&As into static effects from simply melding the antecedent institutions, and dynamic effects associated with post-M&A refocusing of the consolidated institution. We are also the first to estimate the dynamic reactions of other local banks. We find that the static effects of consolidation reduce small business lending, but are mostly offset by the reactions of other banks, and in some cases also by refocusing efforts of the consolidating institutions themselves.