Does Size Matter? The Effects of Bank Mergers on Small Firm Financing across the United States
- Topics:
- Investment Strategy
- Tags:
- Bank,
- Banking,
- Banking Industry,
- Borrower,
- Finance,
- Financial Accounting,
- Financial Services,
- Financing
- Source:
- Elon University
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Overview: The article asserts that financial intermediaries have a fundamental role in determining the amount and distribution of credit to the economy. There is less agreement, unfortunately, about the precise way in which alternative structures of the banking industry manifest their influence on the economy. Recently, it has been shown that, by changing the behavior of lending institutions, monetary policy affects different groups of borrowers in different ways. In this paper, the relationship, if any, between the distribution of available credit to different groups of borrowers and the competitiveness of the banking industry will be explored. Specifically, the existence, for any given stance of monetary policy, of a positive relationship between the amount of loans to small borrowers and the degree of competitiveness of the banking industry is suggested. The intuition is that if many banks compete to finance small firms, then small firms will have the option of switching lenders. Section II describes the data and the methods used for testing the hypothesis. Section III presents and analyzes my results. Section IV concludes the paper.
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Format: PDF | Size: 37KB | Date: Jan 2003 | Pages: 20
