Lending Relationships and Bank Mergers and Acquisitions

Using a unique Norwegian dataset, which combines information on companies’ bank accounts, annual accounts and bank mergers and acquisitions (M&As), we find evidence that such M&As reduce credit availability and worsen borrowing terms for nontransparent firms. Since, due to information asymmetries, such firms are typically more dependent on bank lending relationships, our results indicate that these relationships are advantageous for borrowing firms, and, conversely, the results are not consistent with the presence of a lock-in effect due to an information monopoly by the relationship lender. Date: This version: January 15, 2010.