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The Competitive Effect of a Bank Megamerger on Credit Supply

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Abstract

We study the effect of a merger between two large banks on credit market competition. We identify the competitive effect of the merger using matched loan-level and firm-level data and exploiting variation in the merging banks' market overlap across local lending markets. On the credit market side, we find a reduction in lending, in particular through termination of relationships. In the average market, bank credit decreases by 2.7%. On the real side, firm exit increases by 4%, whereas firms that do not exit and firms that start up experience no adverse real effect on investment and employment.
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hal-01993387 , version 1 (24-01-2019)

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  • HAL Id : hal-01993387 , version 1

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Henri Fraisse, Johan Hombert, Mathias Ll. The Competitive Effect of a Bank Megamerger on Credit Supply. 2016. ⟨hal-01993387⟩
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