Winners or Losers? The Effects of Banking Consolidation on Corporate Borrowers

Winners or Losers? The Effects of Banking Consolidation on Corporate Borrowers

  • EMILIA BONACCORSI DI PATTI
  • GIORGIO GOBBI

Article first published online: 20th March 2007 DOI: 10.1111/j.1540-6261.2007.01220.x

Abstract


We estimate the impact of bank mergers and acquisitions (M&As) on outstanding credit, credit lines, and the sensitivity of investment to cash flow using a large sample of Italian corporate borrowers. We distinguish between firms that experienced relationship termination as a consequence of bank M&As and those that did not. Our findings are consistent with bank M&As having an adverse effect on credit, particularly when the M&A is followed by relationship termination. The effect persists 3 years and then is absorbed, suggesting that firms are able to compensate for the negative shock.

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