Nowhere else to go: Determinants of bank–firm relationship discontinuations after bank mergers

Santiago Carbo-Valverde; Oliver Rehbein

doi:10.1016/j.frl.2023.103808

Nowhere else to go: Determinants of bank–firm relationship discontinuations after bank mergers

Santiago Carbo-Valverde^*, Oliver Rehbein

^*Corresponding author for this work

Institute for Finance, Banking and Insurance

Publication: Scientific journal › Journal article › peer-review

Abstract

This paper investigates firm-bank relationship changes in the context of bank mergers. We find that firms are less likely to switch and more likely to drop their bank relationship after bank mergers. Importantly, in less competitive environments, measured by Lerner index and HHI, relationship drops are more likely. If mergers decrease competition, the existing consolidation wave in banking could thus induce increasingly harmful bank–firm relationship drops. Firms are also more likely to switch and less likely to drop their bank relationships if they are more creditworthy, measured by their z-score and available collateral.

Original language	English
Article number	103808
Journal	Finance Research Letters
Volume	54
DOIs	https://doi.org/10.1016/j.frl.2023.103808
Publication status	Published - Jun 2023

Bibliographical note

Funding Information:
We thank Reint Gropp, Rainer Haselmann, Michael Koetter, Jan Pieter Krahnen, Felix Noth, Simon Rother and Farzad Saidi for valuable comments. We are grateful for feedback from the participants of the IWH doctoral research seminar, the Finance and Accounting Seminar at Goethe University Frankfurt, the CRC Young Researchers Workshop and the CUNEF business school seminar. Santiago Carbo-Valverde gratefully acknowledges financial support from research grants numbered PGC2018-099415-B-00 and PID2020-118883GB-I00 from Spanish Ministry of Science and Innovation . Oliver Rehbein gratefully acknowledges funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) through CRC TR 224 .

Funding Information:
We thank Reint Gropp, Rainer Haselmann, Michael Koetter, Jan Pieter Krahnen, Felix Noth, Simon Rother and Farzad Saidi for valuable comments. We are grateful for feedback from the participants of the IWH doctoral research seminar, the Finance and Accounting Seminar at Goethe University Frankfurt, the CRC Young Researchers Workshop and the CUNEF business school seminar. Santiago Carbo-Valverde gratefully acknowledges financial support from research grants numbered PGC2018-099415-B-00 and PID2020-118883GB-I00 from Spanish Ministry of Science and Innovation. Oliver Rehbein gratefully acknowledges funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) through CRC TR 224.

Publisher Copyright:
© 2023 Elsevier Inc.

Keywords

Bank mergers
Bank–firm relationship
Competition
Z-score

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title = "Nowhere else to go: Determinants of bank–firm relationship discontinuations after bank mergers",

abstract = "This paper investigates firm-bank relationship changes in the context of bank mergers. We find that firms are less likely to switch and more likely to drop their bank relationship after bank mergers. Importantly, in less competitive environments, measured by Lerner index and HHI, relationship drops are more likely. If mergers decrease competition, the existing consolidation wave in banking could thus induce increasingly harmful bank–firm relationship drops. Firms are also more likely to switch and less likely to drop their bank relationships if they are more creditworthy, measured by their z-score and available collateral.",

keywords = "Bank mergers, Bank–firm relationship, Competition, Z-score",

author = "Santiago Carbo-Valverde and Oliver Rehbein",

note = "Funding Information: We thank Reint Gropp, Rainer Haselmann, Michael Koetter, Jan Pieter Krahnen, Felix Noth, Simon Rother and Farzad Saidi for valuable comments. We are grateful for feedback from the participants of the IWH doctoral research seminar, the Finance and Accounting Seminar at Goethe University Frankfurt, the CRC Young Researchers Workshop and the CUNEF business school seminar. Santiago Carbo-Valverde gratefully acknowledges financial support from research grants numbered PGC2018-099415-B-00 and PID2020-118883GB-I00 from Spanish Ministry of Science and Innovation . Oliver Rehbein gratefully acknowledges funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) through CRC TR 224 . Funding Information: We thank Reint Gropp, Rainer Haselmann, Michael Koetter, Jan Pieter Krahnen, Felix Noth, Simon Rother and Farzad Saidi for valuable comments. We are grateful for feedback from the participants of the IWH doctoral research seminar, the Finance and Accounting Seminar at Goethe University Frankfurt, the CRC Young Researchers Workshop and the CUNEF business school seminar. Santiago Carbo-Valverde gratefully acknowledges financial support from research grants numbered PGC2018-099415-B-00 and PID2020-118883GB-I00 from Spanish Ministry of Science and Innovation. Oliver Rehbein gratefully acknowledges funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) through CRC TR 224. Publisher Copyright: {\textcopyright} 2023 Elsevier Inc.",

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AB - This paper investigates firm-bank relationship changes in the context of bank mergers. We find that firms are less likely to switch and more likely to drop their bank relationship after bank mergers. Importantly, in less competitive environments, measured by Lerner index and HHI, relationship drops are more likely. If mergers decrease competition, the existing consolidation wave in banking could thus induce increasingly harmful bank–firm relationship drops. Firms are also more likely to switch and less likely to drop their bank relationships if they are more creditworthy, measured by their z-score and available collateral.

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Nowhere else to go: Determinants of bank–firm relationship discontinuations after bank mergers

Abstract

Bibliographical note

Keywords

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