THE IMPACT OF DE NOVO COMMERCIAL BANK ENTRY

De novo unit-bank entry into rural, nonmetropolitan monopoly or oligopoly markets in restrictive branching states has a significant broad impact on the profitability and deposit interest-rate policies of existing banks. This impact is both immediate and continuing over the 5 post-entry years. De nov...

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Bibliographic Details
Published in:The Journal of finance (New York) 1977-12, Vol.32 (5), p.1587-1604
Main Authors: McCall, Alan S., Peterson, Manferd O.
Format: Article
Language:English
Subjects:
Analysis
Bank assets
Bank capital
Bank earnings
Bank loans
Bank markets
Banking regulation
Banks
Barriers
Branch banking
Commercial banks
Consumer loans
Market entry
Metropolitan areas
Non
Statistical analysis
Unit banking
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Summary:De novo unit-bank entry into rural, nonmetropolitan monopoly or oligopoly markets in restrictive branching states has a significant broad impact on the profitability and deposit interest-rate policies of existing banks. This impact is both immediate and continuing over the 5 post-entry years. De novo branch-bank entry into such markets in less restrictive branching states has a negligible impact. The differential impact of branch-versus unit-bank entry on performance may be the result of varying degrees of restrictiveness of state branch-banking provisions. Consideration should be given to reducing the barriers to branch-bank entry at least for nonmetropolitan markets. Results suggest that, in evaluating de novo charter and branch applications, bank regulatory authorities continue to consider the performance of existing banks in the markets relative to that of comparable banks in non-entry markets. Appendixes.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.1977.tb03356.x