Bank Consolidation and Soft Information Acquisition in Small Business Lending
Posted: 8 Jun 2017
Date Written: 2014
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.
Keywords: Bank consolidation, Bank merger, Decision authority, Information acquisition
JEL Classification: G21, G34, L22, L14, D82
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