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Recent trends in the number and size of bank branches: an examination of likely determinants


  • Timothy H. Hannan
  • Gerald A. Hanweck


In this paper, we examine the role of market characteristics in explaining the much discussed phenomenon of growth in the number of banking institution branches over time, and the much less discussed phenomenon of decline in the size of the average branch. We note first that substitution of bank branches in the US for thrift branches accounts for much of the sharp rise observed for bank branches over time. Using a panel data set that consists of over 2,000 markets observed from 1988 to 2004, we report a number of findings regarding the market characteristics that are associated with the number of branches (of both commercial banks and savings associations) in a market and the average employment size of those branches.

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  • Timothy H. Hannan & Gerald A. Hanweck, 2008. "Recent trends in the number and size of bank branches: an examination of likely determinants," Finance and Economics Discussion Series 2008-02, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2008-02

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    References listed on IDEAS

    1. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1437-1467.
    2. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
    3. Kim, Moshe & Vale, Bent, 2001. "Non-price strategic behavior: the case of bank branches," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1583-1602, December.
    4. Avery, Robert B. & Bostic, Raphael W. & Calem, Paul S. & Canner, Glenn B., 1999. "Consolidation and bank branching patterns," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 497-532, February.
    5. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-666, May.
    6. Erin Davis & Tara Rice, 2007. "The branch banking boom in Illinois: a byproduct of restrictive branching laws," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue May.
    7. Evren Damar, H., 2007. "Does post-crisis restructuring decrease the availability of banking services? The case of Turkey," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2886-2905, September.
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    1. repec:bla:ecnote:v:46:y:2017:i:3:p:527-554 is not listed on IDEAS

    More about this item


    Branch banks ; Banks and banking - United States;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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