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Industry mix and lending environment variability: what does the average bank face

Author

Listed:
  • Jeffery W. Gunther
  • Kenneth J. Robinson

Abstract

Diversification opportunities for banks may be greater today because of the lessening of geographic restrictions. In addition, regional economies have undergone vast transformations, with relatively volatile industries often assuming a diminished role. To assess whether these changes have resulted in a more stable lending environment, Jeff Gunther and Ken Robinson form industry portfolios for banks based on their presence in different states and the mix of economic activity found in those states. The authors find that the risk underlying banks' lending environments declined from 1985 to 1996 because of both a geographic restructuring of the banking system and increasing industrial diversification of state economies.

Suggested Citation

  • Jeffery W. Gunther & Kenneth J. Robinson, 1999. "Industry mix and lending environment variability: what does the average bank face," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 24-31.
  • Handle: RePEc:fip:fedder:y:1999:i:qii:p:24-31
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    File URL: http://www.dallasfed.org/assets/documents/research/efr/1999/efr9902c.pdf
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    References listed on IDEAS

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    1. John H. Boyd & Stanley L. Graham, 1988. "The profitability and risk effects of allowing bank holding companies to merge with other financial firms: a simulation study," Proceedings 213, Federal Reserve Bank of Chicago.
    2. Michelle Clark Neely & David C. Wheelock, 1997. "Why does bank performance vary across states?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-40.
    3. Larry D. Wall & Alan K. Reichert & Sunil Mohanty, 1993. "Deregulation and the opportunities for commercial bank diversification," Economic Review, Federal Reserve Bank of Atlanta, issue Sep, pages 1-25.
    4. Rosen, Richard J. & Lloyd-Davies, Peter R. & Kwast, Myron L. & Humphrey, David B., 1989. "New banking powers : A portfolio analysis of bank investment in real estate," Journal of Banking & Finance, Elsevier, vol. 13(3), pages 355-366, July.
    5. Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 777-788, August.
    6. Peter S. Rose, 1995. "Diversification and interstate banking," Proceedings 461, Federal Reserve Bank of Chicago.
    7. Jith Jayaratne & Philip E. Strahan, 1997. "The benefits of branching deregulation," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 13-29.
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    Cited by:

    1. Pierre-Guillaume Meon & Laurent Weill, 2005. "Can mergers in Europe help banks hedge against macroeconomic risk?," Applied Financial Economics, Taylor & Francis Journals, vol. 15(5), pages 315-326.
    2. Colm Kearney & Frank Barry, 2005. "MNEs and Industrial Structure in Host Countries:A Mean Variance Analysis of Ireland’s Manufacturing Sector," The Institute for International Integration Studies Discussion Paper Series iiisdp023, IIIS.
    3. Meon, Pierre-Guillaume & Weill, Laurent, 2004. "A view of the European Union as an evolving country portfolio," European Journal of Political Economy, Elsevier, vol. 20(4), pages 853-868, November.
    4. Yeager, Timothy J., 2004. "The demise of community banks? Local economic shocks are not to blame," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2135-2153, September.
    5. William Emmons & R. Gilbert & Timothy Yeager, 2004. "Reducing the Risk at Small Community Banks: Is it Size or Geographic Diversification that Matters?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 259-281, April.
    6. Timothy J. Yeager, 2002. "The demise of community banks? local economic shocks aren't to blame," Supervisory Policy Analysis Working Papers 2002-03, Federal Reserve Bank of St. Louis.
    7. Timothy J. Yeager, 2002. "Community bank performance in the presence of county economic shocks," Supervisory Policy Analysis Working Papers 2002-11, Federal Reserve Bank of St. Louis.

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    Keywords

    Banks and banking ; Financial institutions;

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