Branch banking, bank competition, and financial stability
By: Mark Carlson and Kris James Mitchener.
Contributors: Mitchener, Kris James
Series: Finance and economics discussion series ;; 2005-20; Finance and economics discussion series (Online) ;; 2005-20.
Publisher: Federal Reserve Board
Published: 2005
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "It is often argued that branching stabilizes banking systems by facilitating diversification of bank portfolios; however, previous empirical research on the Great Depression offers mixed support for this view.  Analyses using state-level data find that states allowing branch banking had lower failure rates, while those examining individual banks find that branch banks were more likely to fail.  We argue that an alternative hypothesis can reconcile these seemingly disparate findings.  Using data on national banks from the 1920s and 1930s, we show that branch banking increases competition and forces weak banks to exit the banking system.  This consolidation strengthens the system as a whole without necessarily strengthening the branch banks themselves.  Our empirical results suggest that the effects that branching had on competition were quantitatively more important than geographical diversification for bank stability in the 1920s and 1930s"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 5/20/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.