Bank Consolidation and Soft Information Acquisition in Small Business Lending |
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Authors: | Yoshiaki Ogura Hirofumi Uchida |
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Affiliation: | 1. School of Political Science and Economics, Waseda University, 1-6-1 Nishi Waseda, Shinjuku-ku, Tokyo, 169-8050, Japan 2. Graduate School of Business Administration, Kobe University, 2-1 Rokkodai-Cho Nada-ku, Kobe, 657-8510, Japan
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Abstract: | We empirically examine the impact of bank consolidation on bank acquisition of soft information about borrowers. Using a dataset of small business financing, we find that mergers of small banks have a negative impact on soft information acquisition, whereas mergers of large banks have no impact. We also find some evidence that an increase in organizational complexity upon a merger, rather than a post-merger cost-cut, is likely to cause a negative and significant impact on soft information acquisition by small banks. These findings are consistent with the organizational theory that predicts a comparative advantage of simple and flat organizations in acquiring and processing soft information. |
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