Geographic Deregulation and Competition in the U.S. Banking Industry

We examine the effects of geographic deregulation on state‐level competition in U.S. banking markets over the period 1976‐2005. The empirical results confirm that the U.S. banks in general operated under monopolistic competition during the period examined. After partitioning the sample based on bank...

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Bibliographic Details
Published in:Financial markets, institutions & instruments institutions & instruments, 2010-05, Vol.19 (2), p.63-94
Main Authors: Yildirim, H. Semih, Mohanty, Sunil K.
Format: Article
Language:English
Subjects:
bank competition
Bank regulation
Banking
Banking industry
Banking system
Banks
Competition
Competition between banks
Deregulation
Economic history
Financial institutions
G21
G28
Geographic deregulation
Geography
Monopolies
Monopolistic competition
Studies
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Summary:We examine the effects of geographic deregulation on state‐level competition in U.S. banking markets over the period 1976‐2005. The empirical results confirm that the U.S. banks in general operated under monopolistic competition during the period examined. After partitioning the sample based on bank size we find that the market competition for large banks in Delaware, Oregon, and Rhode Island can be characterized as monopolistic while small banks in Arizona and Massachusetts seem to have operated under the conditions of perfect competition. The removal of geographic restrictions appears to have very limited and non‐uniform effect on state‐level competitive conduct. There is some evidence that the U.S. banking industry might have actually experienced a less competitive behavior in recent years due to increased market power of larger banks.
ISSN:0963-8008
1468-0416
DOI:10.1111/j.1468-0416.2010.00155.x