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Full-Text Articles in Business
The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White
The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White
Faculty Publications
We study the dynamics of market entry following mergers and acquisitions (M&As) using banking industry data. The findings suggest that M&As are associated with statistically and economically significant increases in the probability of entry. The data suggest that M&As affect the proportion of the markets with entry by about 10-20%. These findings also suggest that entry may be part of an "external" effect of M&As that helps supply credit to some relationship-dependent small business borrowers. Our results are robust to the use of alternative econometric methods, changes in specifications of the exogenous variables, and alteration of the data samples.
Race, Redlining, And Automobile Insurance Prices, Scott E. Harrington, Gregory R. Niehaus
Race, Redlining, And Automobile Insurance Prices, Scott E. Harrington, Gregory R. Niehaus
Faculty Publications
Following Becker's (1993) suggestion that tests for discrimination should attempt to infer whether profits differ for products sold to minorities and nonminorities, this article tests the hypothesis that racial discrimination affects market prices of auto insurance in Missouri. Compared with tests for discrimination in lending markets, our results are less susceptible to bias from omitted variables.Controlling for available demographic and coverage- related factors, we do not find that loss ratios at the zip-code level are negatively related to percent minority population. This finding is inconsistent with the hypothesis that racial discrimination increases premiums relative to expected claim costs for minorities.
The Coexistence Of Multiple Distribution Systems For Financial Services: The Case Of Property-Liability Insurance, Allen N. Berger, J. David Cummins, Mary A. Weiss
The Coexistence Of Multiple Distribution Systems For Financial Services: The Case Of Property-Liability Insurance, Allen N. Berger, J. David Cummins, Mary A. Weiss
Faculty Publications
Property-liability insurance is distributed through a direct-writer system, where agents represent one insurer, and an independent- agency system, where agents represent several insurers. Independent-agency insurers have higher costs than direct writers. The market- imperfections hypothesis attributes the coexistence of the two types of insurers to impediments to competition, while the product-quality hypothesis holds that independent-agency insurers provide higher-quality services. We measure cost efficiency and profit efficiency for property-liability insurers and find strong support for the product-quality hypothesis, implying that independent-agency insurers produce higher-quality outputs and are compensated by higher revenues.
Relationship Lending And Lines Of Credit In Small Firm Finance, Allen N. Berger, Gregory F. Udell
Relationship Lending And Lines Of Credit In Small Firm Finance, Allen N. Berger, Gregory F. Udell
Faculty Publications
This article examines the role of relationship lending in small firm finance. It examines price and nonprice terms of bank lines of credit (L/Cs) extended to small firms. The focus on LICs allows the examination of a type of loan contract in which the hank- borrower relationship is likely to be an important mechanism for solving the asymmetric information problems associated with financing small enterprises. We find that borrowers with longer banking relationships pay lower interest rates and are less likely to pledge collateral.These results are consistent with theoretical arguments that relationship lending generates valuable information about borrower quality.
Some Evidence On The Empirical Significance Of Credit Rationing, Allen N. Berger, Gregory F. Udell
Some Evidence On The Empirical Significance Of Credit Rationing, Allen N. Berger, Gregory F. Udell
Faculty Publications
This paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988. While commercial loan rates are "Sticky," consistent with rationing, this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory. In addition, the proportion of new loans issued under commitment does not increase significantly when credit markets are tight, despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing. Overall, the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon.