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Profitability and Long-term Survival of Community Banks: Evidence from Texas

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  • Acharya, Ram N.
  • Kagan, Albert
  • Richards, Timothy J.

Abstract

This study examines the impact of distance among competing bank locations on market their pricing behavior. A general spatial autoregressive model that nests both spatial autoregressive and spatial error models is used to examine the impact of distance on pricing behavior of 686 non-metro banks in Texas. Results show that non-metro banks exercise market power in pricing their products. An increase in spatial competition may reduce profitability and challenge long term survival of small community based financial institutions.

Suggested Citation

  • Acharya, Ram N. & Kagan, Albert & Richards, Timothy J., 2006. "Profitability and Long-term Survival of Community Banks: Evidence from Texas," 2006 Annual meeting, July 23-26, Long Beach, CA 21453, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21453
    DOI: 10.22004/ag.econ.21453
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    References listed on IDEAS

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