Geographic deregulation and commercial bank performance in U.S. state banking markets
AbstractThis paper examines the effects of geographical deregulation on commercial bank performance across states. We reach several general conclusions. First, the process of deregulation on an intrastate basis generally improves bank profitability and performance with higher returns and reduced riskiness. Deregulation of interstate banking produces mixed findings. For small banks, interstate banking deregulation leads to reduced riskiness. For medium-sized banks, it leads to increased riskiness. And for large banks, it leads to increased and decreased riskiness depending on the risk variable considered. Second, macroeconomic variables - the unemployment rate, real personal income per capita, and the growth rate of real personal income - and the average interest rate affect bank performance as much, or more, than the process of deregulation, especially for the small and medium-sized banks. The large banks, however, generally do not respond significantly to state-level macroeconomic variables or the average interest rate. Finally, while some analysts argue that deregulation toward full interstate banking and branching produced more efficient banks and a healthier banking system, we find mixed results on this issue.
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Bibliographic InfoArticle provided by Elsevier in its journal The Quarterly Review of Economics and Finance.
Volume (Year): 51 (2011)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/inca/620167
Commercial banks Geographic deregulation Bank performance;
Other versions of this item:
- YongDong Zou & Stephen M. Miller & Bernard Malamud, 2008. "Geographic Deregulation and Commercial Bank Performance in US State Banking Markets," Working papers 2008-25, University of Connecticut, Department of Economics.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
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