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The impact of bank consolidation on commercial borrower welfare


Ongena, Steven; Karceski, Jason; Smith, David C (2005). The impact of bank consolidation on commercial borrower welfare. Journal of Finance, 60(4):2043-2082.

Abstract

We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger-induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship

Abstract

We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger-induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship

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Citations

41 citations in Web of Science®
51 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 August 2005
Deposited On:10 Mar 2014 14:23
Last Modified:05 Apr 2016 17:39
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0022-1082
Publisher DOI:https://doi.org/10.1111/j.1540-6261.2005.00787.x
Official URL:http://www.zora.uzh.ch/92704/
Other Identification Number:merlin-id:9207

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