This study examines the impact of a regional bank merger in Japan on borrowing by small businesses, focusing on firms that borrow from the acquiring bank, the acquired bank, or both. First, we find that post-merger borrowing costs declined. This result suggests that small borrowers enjoy more favorable post-merger financing conditions because efficiencies from economies of scale lead to lower costs. Second, we<strong> </strong>find that post-merger borrowing costs decline for firms that borrow only from the acquiring or acquired bank, whereas they did not decline for firms that borrow from both. Third, we find that only small business loans to firms that borrow from both the acquiring and acquired banks decrease post-merger. This result suggests that small business lending might decline because of a merged bank’s loan portfolio and lending strategy.
The Effect of Credit Scoring on Small Business Lending in Low- and Moderate-Income Areas
