Do mergers and acquisitions impact bank lending behavior in Kenya?

This paper examines the impact of bank merger and acquisitions (M&As) on lending behavior by commercial banks. We employ the dataset of 31 sample Kenyan commercial banks over the period 2003 to 2015. Further we employ panel data models as well as difference-in-differences (DID) to explain the effects of mergers on loan pricing behavior and credit supply. The empirical analysis document evidence to the effect that bank M&As lowers lending rates besides increasing loan supply. These results imply that merged banks can obtain synergy gains and can pass these gains to their customers in form of reduced lending rates and increased credit availability. However, regulators need to carefully balance between the efficiency gains of M&As vis-à-vis the possible costs of increased market power that results from the merger activities.