The Role of Advertising in Commercial Banking
I use a new Call Reports data item to revisit the role of advertising in US commercial banking. I examine how banks' advertising varies with the deposit market structure and whether bank profitability is influenced by advertising. My analysis addresses the endogeneity of market structure and advertising variables using instrumental variables. I find that banks advertise more with increasing market concentration, whereas banks with larger market shares and size advertise less. I also find that advertising has a positive and economically significant impact on bank profitability. These results suggest that advertising is an important aspect of bank competition.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jan 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Arndt, Johan & Simon, Julian L, 1983. "Advertising and Economies of Scale: Critical Comments on the Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 32(2), pages 229-42, December.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
- Elizabeth K. Kiser, 2002. "Household switching behavior at depository institutions: evidence from survey data," Finance and Economics Discussion Series 2002-44, Board of Governors of the Federal Reserve System (U.S.).
- Pinho, Paulo Soares de, 2000. "The impact of deregulation on price and non-price competition in the Portuguese deposits market," Journal of Banking & Finance, Elsevier, vol. 24(9), pages 1515-1533, September.
- DeYoung, Robert & Hasan, Iftekhar, 1998. "The performance of de novo commercial banks: A profit efficiency approach," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 565-587, May.
- Hochman, Oded & Luski, Israel, 1988. "Advertising and Economic Welfare: Comment," American Economic Review, American Economic Association, vol. 78(1), pages 290-96, March.
- John D. Wolken & Frederick W. Derrick, 1986. "Advertising, market power and non-price competition: evidence from commercial banking," Working Papers in Banking, Finance and Microeconomics 86-3, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & Loretta J. Mester, 1997.
"Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?,"
Center for Financial Institutions Working Papers
97-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
- Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Working Papers 97-1, Federal Reserve Bank of Philadelphia.
- Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Finance and Economics Discussion Series 1997-10, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & Timothy H. Hannan, 1988.
"The price-concentration relationship in banking,"
Finance and Economics Discussion Series
23, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & Timothy H. Hannan, 1987. "The price-concentration relationship in banking," Research Papers in Banking and Financial Economics 100, Board of Governors of the Federal Reserve System (U.S.).
- Strickland, Allyn D & Weiss, Leonard W, 1976. "Advertising, Concentration, and Price-Cost Margins," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1109-21, October.
- Nichols, Len M, 1985. "Advertising and Economic Welfare," American Economic Review, American Economic Association, vol. 75(1), pages 213-18, March.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Buxton, A J & Davies, S W & Lyons, B R, 1984. "Concentration and Advertising in Consumer and Producer Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 32(4), pages 451-64, June.
- James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
- Corvoisier, Sandrine & Gropp, Reint, 2001.
"Bank Concentration and Retail Interest Rates,"
Working Paper Series
0072, European Central Bank.
- Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 941-964.
- Robert DeYoung, 2000. "For how long are newly chartered banks financially fragile?," Working Paper Series WP-00-9, Federal Reserve Bank of Chicago.
- Calem, Paul S & Carlino, Gerald A, 1991.
"The Concentration/Conduct Relationship in Bank Deposit Markets,"
The Review of Economics and Statistics,
MIT Press, vol. 73(2), pages 268-76, May.
- Paul S. Calem & Gerald A. Carlino, 1989. "The concentration/conduct relationship in bank deposit markets," Working Papers 89-26, Federal Reserve Bank of Philadelphia.
- Robert DeYoung & William Hunter & Gregory Udell, 2004.
"The Past, Present, and Probable Future for Community Banks,"
Journal of Financial Services Research,
Springer, vol. 25(2), pages 85-133, April.
- Robert DeYoung & William C. Hunter & Gregory F. Udell, 2003. "The past, present, and probable future for community banks," Working Paper Series WP-03-14, Federal Reserve Bank of Chicago.
- Hasan, Iftekhar & Hunter, William Curt & MathisIII, Roswell E., 2000. "Promotional Expenditures, Market Competition, and Thrift Behavior," Journal of Business Research, Elsevier, vol. 50(2), pages 177-184, November.
- Nelson, Phillip J, 1975. "The Economic Consequences of Advertising," The Journal of Business, University of Chicago Press, vol. 48(2), pages 213-41, April.
- Lapp, John S, 1976. "Market Structure and Advertising in the Savings and Loan Industry," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 202-08, May.
- Nicola Cetorelli, 1999. "Competitive analysis in banking: appraisal of the methodologies," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 2-15.
- Heggestad, Arnold A & Mingo, John J, 1976. "Prices, Nonprices, and Concentration in Commercial Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 107-17, February.
- Astrid A. Dick, 2006. "Nationwide Branching and Its Impact on Market Structure, Quality, and Bank Performance," The Journal of Business, University of Chicago Press, vol. 79(2), pages 567-592, March.
- Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
- Hannan, Timothy H., 1991. "Bank commercial loan markets and the role of market structure: evidence from surveys of commercial lending," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 133-149, February.
- Sutton, C J, 1974. "Advertising, Concentration and Competition," Economic Journal, Royal Economic Society, vol. 84(333), pages 56-69, March.
- Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
- S. A. Ozga, 1960. "Imperfect Markets Through Lack of Knowledge," The Quarterly Journal of Economics, Oxford University Press, vol. 74(1), pages 29-52.
- Stephen Martin, 1979. "Advertising, Concentration, and Profitability: The Simultaneity Problem," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 639-647, Autumn.
- Ors, Evren, 2004. "Postmortem on the Federal Reserve's Functional Cost Analysis Program: how useful was the FCA?," Review of Financial Economics, Elsevier, vol. 13(1-2), pages 121-148.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5461. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.