Bank regulatory size thresholds,merger and acquisition behavior,and small business lending |
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| Institution: | 1. School of Business, University of Kansas, USA;2. Mays Business School, Texas A&M University, 4218 TAMU, College Station, TX 77845, USA;3. Wharton Financial Institutions Center, USA;4. Hankamer School of Business, Baylor University, USA;1. Portsmouth Business School, University of Portsmouth, UK;2. Department of Banking and Financial Management, University of Piraeus, Greece;3. Institute of Global Law, Economics and Finance, QMUL, UK;4. Surrey Business School, University of Surrey, UK;5. ALBA Graduate Business School at the American College of Greece, Greece;6. Hellenic Open University, Greece |
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| Abstract: | Size threshold-based regulatory requirements are pervasive in banking, but little is known about how they affect the merger and acquisition (M&A) behavior of banks around the thresholds. M&As cause discrete increases in size, so we hypothesize changes in banks' M&A behavior near regulatory size thresholds and associated real effects (changes in small business lending by the acquiring banks). We develop a novel research design that estimates indirect treatment effects for banks just below the thresholds. We find strong evidence of indirect treatment effects on bank M&A behavior and the small business lending of the merged banks. Our results illustrate the importance of indirect treatment effects in difference-in-differences studies involving size thresholds. |
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