The profitability of small, single-market banks in an era of multimarket banking

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The profitability of small, single-market banks in an era of multimarket banking

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Timothy H. Hannan
Robin A. Prager

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Timothy H. Hannan

Abstract

This paper examines the relationship between multimarket bank presence and the profitability (and therefore viability) of small, single-market banks. We find that increased presence of multimarket banks is associated with a significant reduction in the profitability of small, single-market banks operating in rural banking markets, but not of those operating in urban markets. We explore this relationship by breaking single-market bank profits down into several components in order to shed light on the mechanisms through which multimarket bank presence might influence the profitability of single-market banks.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2006-41.

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Date of creation: 2006
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Handle: RePEc:fip:fedgfe:2006-41

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This paper has been announced in the following NEP Reports:

NEP-ALL-2006-12-16 (All new papers)
NEP-BAN-2006-12-16 (Banking)
NEP-COM-2006-12-16 (Industrial Competition)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Lawrence J. Radecki, 1998. "The expanding geographic reach of retail banking markets," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 15-34. [Downloadable!]
Hannan, Timothy H. & Prager, Robin A., 2006. "Multimarket bank pricing: An empirical investigation of deposit interest rates," Journal of Economics and Business, Elsevier, vol. 58(3), pages 256-272. [Downloadable!] (restricted)
Other versions:
- Timothy H. Hannan & Robin A. Prager, 2004. "Multimarket bank pricing: an empirical investigation of deposit interest rates," Finance and Economics Discussion Series 2004-38, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Elizabeth K. Kiser, 2004. "Modeling the whole firm: the effect of multiple inputs and financial intermediation on bank deposit rates," Finance and Economics Discussion Series 2004-07, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Steven Pilloff, 1999. "Does the Presence of Big Banks Influence Competition in Local Markets?," Journal of Financial Services Research, Springer, vol. 15(3), pages 159-177, May. [Downloadable!] (restricted)

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This page was last updated on 2008-9-26.

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