Working Paper: NBER ID: w29284
Authors: Bernadette A. Minton; Alvaro G. Taboada; Rohan Williamson
Abstract: We examine the effects of bank merger and local market characteristics on local small business lending. Mergers involving small, in-state acquirers are positively associated with small business loan (SBL) originations in counties where target banks are located. Conversely, mergers involving large, out-of-state acquirers are associated with fewer SBL originations. The analysis suggests that the results are driven by acquirer’s choice of target. Small and in-state acquirers target banks that focus more on SBL and targets with strong relationships while large, out-of-state acquirers pursue better performing banks with stronger balance sheets and less focus on SBL. Results are particularly strong in counties with a large number of small firms. Post-merger activity supports banks expanding on their acquisition strategy decisions. The findings suggest that acquirer strategy is important for evaluating the impact of acquisitions on local community development and that one-size-fits-all policy solutions for bank mergers may not produce common local outcomes.
Keywords: bank mergers; small business lending; community investment
JEL Codes: G21; G34; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| characteristics of the target market (R20) | lending outcomes post-merger (G21) |
| mergers involving small in-state acquirers (G34) | increase in small business loan (SBL) originations (M13) |
| mergers involving large out-of-state acquirers (G34) | decrease in small business loan (SBL) originations (G21) |
| strategy of small acquirers (G34) | enhance SBL originations (G24) |
| strategy of large acquirers (G34) | do not enhance SBL originations (G33) |