Staying, Dropping, or Switching : The Impacts of Bank Mergers on SMEs

This paper studies the impact of bank mergers on firm-bank lending relationships using detailed loan contract data from Belgium. We argue that in order to accurately gauge the heterogeneous impacts of mergers, the analysis must distinguish borrowers not only by their relationship with the acquiring versus the target bank in a merger and by firm size, but also by whether they have single versus multiple-bank relationships. For single-relationship borrowers, it is necessary to go beyond the usual comparison of relationship continuation and discontinuation to analyze the three alternatives of staying, dropping, and switching. For multiple-relationship borrowers, relationship intensity also plays a role