Abstract
We empirically examine the impact of bank consolidation on bankers' acquisition of soft information about borrowers. Using a dataset of small businesses, we find that bank mergers have a negative impact on soft information acquisition by small banks while those by large banks have no impact. We also find that large banks do not acquire substantial soft information irrespective of merger experiences. Detailed analyses of the post-merger organizational restructuring show that the measures of an increase in organizational complexity upon a merger have a negative and significant impact on soft information acquisition by small banks, while the measures of cost-cut do not have any significant impact. These results imply that the increase in organizational complexity by bank mergers hindered soft information acquisition, which is consistent with Stein's prediction [2002, J. Fin.] on the comparative advantage of simple and flat organizations in acquiring and processing soft information.
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