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Bank consolidation and small business lending: it's not just bank size that matters
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Bank consolidation and small business lending: it's not just bank size that matters

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  • Joe Peek
  • Eric Rosengren

Abstract

Concern with the potential effect of bank mergers on small business lending has stemmed from a belief that larger acquirers may be less willing than their smaller targets to be active in the small business lending market. However, we find that in roughly half the commercial and savings bank mergers of the past three years, the acquirer has a larger portfolio share of small business loans than its target; moreover, the most common acquirer of small banks is another small bank. The empirical results support the hypothesis that acquirers tend to recast the target in their own image, causing small business loan portfolio shares of the consolidated bank to converge toward the pre-merger portfolio share of the acquirer. Since acquirers are almost as likely to have larger as smaller shares of small business loans in their portfolios, compared to their targets, this suggests that not all mergers will shrink small business lending; many will actually increase it.

Suggested Citation

  • Joe Peek & Eric Rosengren, 1997. "Bank consolidation and small business lending: it's not just bank size that matters," Working Papers 97-1, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:97-1
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    References listed on IDEAS

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    Keywords

    Bank mergers; Small business;

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