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Geographic deregulation and commercial bank performance in U.S. state banking markets

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  • Zou, YongDong
  • Miller, Stephen M.
  • Malamud, Bernard

Abstract

This 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.

Suggested Citation

  • Zou, YongDong & Miller, Stephen M. & Malamud, Bernard, 2011. "Geographic deregulation and commercial bank performance in U.S. state banking markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 28-35, February.
  • Handle: RePEc:eee:quaeco:v:51:y:2011:i:1:p:28-35
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    4. Kondo, Kazumine, 2017. "Does Branch Network Size Influence Positively the Management Performance of Japanese Regional Banks?," MPRA Paper 81257, University Library of Munich, Germany.
    5. Srinivas Nippani & Ran Ling, 2021. "Bank size and performance: An analysis of the industry in the United States in the post‐financial‐crisis era," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(3), pages 587-606, September.
    6. Ken B. Cyree, 2016. "The Effects Of Regulatory Compliance For Small Banks Around Crisis-Based Regulation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 39(3), pages 215-246, September.
    7. Stoyu I. Ivanov, 2014. "Performance Analysis Of Banks Headquartered In Hollywood Versus Silicon Valley," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 8(2), pages 33-43.
    8. Srinivas Nippani & Kenneth M. Washer & N.R. Vasudeva Murthy, 2013. "Size and Day-of-the-Week Effect in the Banking Industry: A Comparative Analysis Based on Economic Conditions," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(3), pages 1-9, July.
    9. Craig Wesley Carpenter & F. Carson Mencken & Charles M. Tolbert & Michael Lotspeich, 2018. "Locally Owned Bank Commuting Zone Concentration and Employer Start-Ups in Metropolitan, Micropolitan and Non-Core Rural Commuting Zones from 1970-2010," Working Papers 18-34, Center for Economic Studies, U.S. Census Bureau.
    10. Reilly, Patrick A., 2020. "The effects of credit on high school graduation: Evidence from U.S. bank branching deregulation," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 109-119.
    11. Rashid Khalil* & Dr. Mohd. Sollehudin Bin Shuaib & Dr. Suhaimi Bin Ishak, 2018. "Bank-SMEs Relationship: A Critical Review of Firm & Industry Specific Determinants Influencing Banks’ Performance," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 4(12), pages 777-791, 12-2018.
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    13. Kondo, Kazumine, 2014. "Cross-Prefecture Expansion of Regional Banks in Japan and Its Effects on Lending-Based Income," MPRA Paper 52978, University Library of Munich, Germany.

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    More about this item

    Keywords

    Commercial banks Geographic deregulation Bank performance;

    JEL classification:

    • 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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