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Byline: Robert B. Avery (1), Katherine A. Samolyk (2) Keywords: Banks; mergers; consolidation; small business Abstract: This paper examines how bank consolidation activity affected small business lending in local U.S. banking markets during two 3-year study periods, focussing on the role played by community banks in the process. During the 1994--1997 period, we find that consolidation activity involving big banks is associated with lower loan growth, whereas community bank consolidations and a greater presence of community banks in the market are associated with higher loan growth. During the 1997--2000 period, consolidation activity is either unrelated to small business loan growth or is associated with higher loan growth. In both study periods we find that, net of organization reclassifications due to consolidation or asset growth, the share of small business lending funded by community banks rose, particularly in markets undergoing consolidation. Author Affiliation: (1) Federal Reserve Board of Governors, USA (2) Federal Deposit Insurance Corporation, USA Article History: Registration Date: 30/09/2004

Byline: Allen N. Berger (3), Lawrence G. Goldberg (4), Lawrence J. White (5) Keywords: bank; mergers; small business Abstract: We study the effects of structural changes in banking markets on the supply of credit to small businesses. Specifically, we examine whether bank mergers and acquisitions (M &amp As) and entry have ``external'' effects on small business loans by other banks in the same local markets. The results suggest modest positive external effects from these dynamic changes in competition, except that large banks may reduce small business lending in reaction to entry. We confirm bank size and age as important determinants of this lending, and show that the measured age effect does not appear to be driven by local market M &amp A activity. Author Affiliation: (1) Board of Governors, Federal Reserve System, Washington, DC, 20551, U.S.A. (2) Wharton Financial Institutions Center, Philadelphia, PA, 19104, U.S.A (3) Federal Reserve Board, Mail Stop 153, 20th and C Sts. NW, Washington, DC, 20551, Phone (4) Department of Finance, University of Miami, Coral Gables, FL, 33124, U.S.A (5) Stern School of Business, New York University, New York, NY, 10012-1126, U.S.A Article History: Registration Date: 12/10/2004

The efficiency levels of some 760 branches of a leading US commercial bank were evaluated to understand issues which concern productivity at the bank level such as conceptual measurement and policy. Results are congruous with intermediation and production approaches which imply that bank branches are significantly smaller than efficient scale. Findings on branch x-inefficiencies, which also confirm results in the bank-level, are shown to be at 5% to 10% of total branching costs and about 20% to 25% of branch operating costs.

A central issue currently debated among bank analysts and economists is whether mergers enhance the efficiency of surviving banks. This paper investigates the postmerger performance of acquiring banks that participated [...]

This study examined the impact of strategic similarities between target and bidder firms on changes in postmerger performance. Set in the U.S. banking industry, the empirical examination shows that mergers between banks exhibiting similar strategic characteristics result in better performance than those involving strategically dissimilar banks. (Reprinted by permission of the publisher.)

We conduct a unique test of adverse selection in the equity issuance process. While common stock is the dominant means of payment in bank mergers, stock acquisition agreements provide target shareholders with varying degrees of protection against adverse price movements in the bidder's stock between the time of the merger agreement and the time of merger completion. We show that it is the degree of protection against adverse price changes and not the percent of stock offered in a bank merger that explains bidder merger announcement abnormal returns. This result is difficult to explain outside of an adverse selection framework. (Reprinted by permission of the publisher.)

A study is conducted to examine the impact of bank capital requirements on the financing of bank mergers and the response of the stock market to the merger announcement. One hundred bank mergers are analyzed in terms of the payment methods used and the change in the stock prices of the merging banks on the day of the announcement. The findings indicate that merger financing is affected by the relative sizes of both parties and the capital adequacy of the acquirer. The value of the acquiring bank's equity is found to decline after the merger announcement if the deal was paid in stock.

A study was conducted to evaluate the economic determinants which condition bank merger premiums. The study focuses on financial, regulatory and managerial variables which influence such premiums and considers the financial nature of target banks and their market franchise values. Results show that merger premiums are conditioned by both acquirer and target bank characteristics and also by the regulations of both banks' states.

The merger process is rapidly altering the industry and organizational structure of U.S. commercial banks and, by implication, the relationships between domestic and foreign banks and between banks themselves and [...]

A knowledge-based view of corporate acquisitions is introduced and the post-acquisition consequences on performance of integration decisions and capability-building mechanisms are tested. The results indicate that the process view of acquisitions, which highlights the role of integration phase, plays an important role in understanding the performance of the acquisition process.