This paper examines how the merger between two megabanks affects bank concentration and firms' access to credit. We find that in local markets in which the merger leads to a large increase in bank concentration, the merged bank decreases the supply of credit both to existing firms and to new firms. This reduction in credit supply is offset by non-merging banks which expand lending in markets in which the
merging banks reduce lending. In some specifications, the substitution effect is strong enough to make the overall effect on credit supply statistically insignificant. Moreover, the substitution effect is at work even for
small borrowers, risky borrowers, and new entrants.