Market Power, Bank Megamergers, and the Welfare of Bank Borrowers



We provide evidence on the effects of four market transforming bank megamergers on the market value of their corporate customers. Our event study analysis of the effects of these four megamergers indicates that their corporate borrowers experienced large wealth losses. Large wealth losses were also observed for a matched sample of companies that were not borrowers at the banks involved in the megamergers. Our results are consistent with the predictions of the market power hypothesis that argues that market transforming mergers may increase the market power of firms in an industry to the point of producing harm to their customers, in this case their corporate borrowers, and indeed for firms that are not customers of the merging banks. Paper download: Info: P. Roosenboom,