EH.Net Abstracts in Economic History

                ABSTRACTS IN ECONOMIC HISTORY
                     (c) 2003 EH.Net
-----------------------------------------------------------

Name: Kris James Mitchener
Email: kmitchener at scu.edu
Institution: Santa Clara University

Co-author: Mark Carlson
Federal Reserve Board
Mail Stop 86
20th and Constitution Ave. NW
Washington, DC 20551
Mark.A.Carlson at frb.gov

Title: Branch Banking, Bank Competition, and Financial Stability

Internet Address of abstracted work: not available

By mail:
Department of Economics
Santa Clara University
Santa Clara, CA
95053-0385

Language: English

Abstract:
It is often argued that branching stabilizes banking systems by 
facilitating diversification of bank portfolios; however, previous 
empirical research on the Great Depression cannot be reconciled with 
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.

Bibliography: Mitchener, Kris James and Mark Carlson. "Branch 
Banking, Bank Competition, and Financial Stability." Santa Clara 
University/Federal Reserve Board, Working Paper 2003.

Subject: H
Geographical Area: 7
Country/Region: US
Time Period: 8

-------------------------------------------------------
Visit the library of Abstracts in Economic History or submit your 
abstract at: http://www.eh.net/abstracts