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Has Deregulation Affected Births, Deaths, and Marriages in the U.S. Commercial Banking Industry?

  • Yongil Jeon

    (Central Michigan University)

  • Stephen M. Miller

    (University of Nevada, Las Vegas, and University of Connecticut)

Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminating with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Less well documented, but equally important, was the continuing entry of new banks, tempering the decline in the overall number of banking institutions. This paper examines whether deregulation affected bank new-charter (birth), failure (death), and merger (marriage) rates during the 1980s and 1990s after controlling for bank performance and state economic activity. We find evidence that intrastate deregulation stimulated births and marriages, but not deaths. Moreover, we find little evidence that interstate deregulation affected births, deaths, or marriages, except that the marriage rate rose after the implementation of the Interstate Banking and Branching Efficiency Act. Finally, pair-wise temporal causality tests among births, deaths, and marriages show that mergers temporally lead new charters and that failures lead mergers (a demonstration effect).

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File URL: http://web2.uconn.edu/economics/working/2005-24.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-24.

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Length: 37 pages
Date of creation: Jan 2005
Date of revision:
Publication status: Published in Economic Inquiry, April 2007
Handle: RePEc:uct:uconnp:2005-24
Note: An earlier version, "Births, Deaths, and Marriages in the U.S. Commercial Banking Industry" was presented at the Eastern Economic Association meetings, New York City, February 2001. We acknowledge the helpful comments of the discussant, T. Critchfield, and a colleague, B. Wimmer.
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Web page: http://www.econ.uconn.edu/

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  1. Stiroh, Kevin J & Strahan, Philip E, 2003. " Competitive Dynamics of Deregulation: Evidence from U.S. Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 801-28, October.
  2. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers 1-88-2, Pennsylvania State - Department of Economics.
  3. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
  4. Kevin J. Stiroh, 2002. "Diversification in banking: is noninterest income the answer?," Staff Reports 154, Federal Reserve Bank of New York.
  5. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  6. Yongil Jeon & Stephen M. Miller, 2002. "Bank Concentration and Performance," Working papers 2002-25, University of Connecticut, Department of Economics.
  7. Richard Cebula & Michael Toma, 2006. "Determinants of Geographic Differentials in the Voter Participation Rate," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(1), pages 33-40, March.
  8. David P. Ely & Kenneth J. Robinson, 2001. "Consolidation, technology, and the changing structure of banks' small business lending," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q I, pages 23-32.
  9. Elena Podrecca & Gaetano Carmeci, 2001. "Fixed investment and economic growth: new results on causality," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 177-182.
  10. Robert DeYoung, 1999. "Birth, growth, and life or death of newly chartered banks," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 18-35.
  11. 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, MIT Press, vol. 114(4), pages 1437-1467, November.
  12. DeYoung, Robert & Roland, Karin P., 2001. "Product Mix and Earnings Volatility at Commercial Banks: Evidence from a Degree of Total Leverage Model," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 54-84, January.
  13. Jayaratne, Jith & Strahan, Philip E, 1998. "Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 239-73, April.
  14. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-71, May.
  15. Kaparakis, Emmanuel I & Miller, Stephen M & Noulas, Athanasios G, 1994. "Short-Run Cost Inefficiency of Commercial Banks: A Flexible Stochastic Frontier Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 875-93, November.
  16. Yongil Jeon & Stephen M. Miller, 2001. "Deregulation and Structural Change in the U.S. Commercial Banking Industry," Working papers 2001-07, University of Connecticut, Department of Economics.
  17. Yonjil Jeon & Stephen M. Miller, 2005. "Bank Performance: Market Power or Efficient Structure?," Working papers 2005-23, University of Connecticut, Department of Economics.
  18. Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 141-61, May.
  19. Cebula, Richard, 1993. "The Regional Distribution of Bank Closings in the United States: An Extension of the Amos Analysis," MPRA Paper 51488, University Library of Munich, Germany.
  20. William R. Keeton, 2000. "Are mergers responsible for the surge in new bank charters?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 21-41.
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