Bank Mergers and Lending Relationships

• In Event: Breakfast with Research Roundtable Forum Session
  In Paper Session: Roundtable 3: Financial Accounting II

Abstract

I exploit hand-collected data on bank mergers and cross-sectional variation in borrower exposure to merger partners to study the effect of bank organizational structure on lending relationships. Using loan-level data, I find that borrowers that have pre-merger relationships with the target bank are 13.7% less likely to access credit from the merged bank. This effect is stronger for lending relationships in which soft information is more important, suggesting that bank restructuring affects information processing and debt contracting. Moreover, firms having pre-merger relationships with target banks suffer from relationship disruptions: they reduce investment and lay off employees when facing financial shocks.

Author

• Aluna Wang, Carnegie Mellon University