Essay upon Banking

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Essays upon banking

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Author: Erel, Isil

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Other Contributors: Sloan College of Administration.

Advisor: Stewart C. Myers and Sophie A. Ross.

Department: Sloan School of Management.

Author: Massachusetts Company of Technology

Date Released: 2006


This thesis consists of two chapters that investigate two important problems in bank of the past decade: the effect of banking consolidation for the borrowers plus the regulatory capital requirements intended for banks. The first section analyzes the result of bank mergers in loan prices, and the well being implications to get borrowers. Particularly I test out the speculation that mergers create performance gains that happen to be, in fact , given to to debtors through a reduction in interest rates. The choice hypothesis is that mergers result in greater industry concentration also an increase in the cost of capital to get borrowers. Utilizing a proprietary loan-level data set for U. S. business banks, I find that purchasing banks, usually, reduce the distributes on their fresh commercial and industrial loans after a combination. The reduction in loan distributes is the two larger and in addition more continual for small acquirers, with total low assets below $10 billion dollars. These results seem to be motivated by expense efficiencies due to mergers, because the results are more robust for the sample of acquirers with larger than typical declines inside their operating costs after all their mergers. Moreover, the decrease in spreads is significantly larger in the event the acquirer and the target have some geographical overlap of market segments before the combination, and, therefore, more potential...