Governance and the Success of U.S. Community Banks, 1790-2010: Mutual Savings Banks, Local Commercial Banks, and the Merchants (National) Bank of New Bedford, Massachusetts

59 Pages Posted: 9 May 2011

See all articles by Robert E. Wright

Robert E. Wright

Augustana College - Division of Social Sciences

Date Written: May 7, 2011

Abstract

Annual time series data show that from 1790 through 2010 only about 1 percent of U.S. commercial banks failed each year on average. Many community banks, including mutual savings banks and local commercial banks, provided valuable intermediation services for decades before failing or, more likely, merging. The key to community bank success was governance. Local long-term investors, like the stockholders of the Merchants Bank of New Bedford (later the Merchants National Bank), had both the incentive and ability to elect effective board directors who carefully chose and monitored bank officers (presidents and cashiers) charged with producing steady dividends.

Keywords: banks and banking, bank failures, community banks, community banking, unit banks, unit banking, mutual savings banks, mutual savings banking, corporate governance, bank management, financial history, business history

JEL Classification: G21, G30, N21, N22

Suggested Citation

Wright, Robert Eric, Governance and the Success of U.S. Community Banks, 1790-2010: Mutual Savings Banks, Local Commercial Banks, and the Merchants (National) Bank of New Bedford, Massachusetts (May 7, 2011). Available at SSRN: https://ssrn.com/abstract=1834803 or http://dx.doi.org/10.2139/ssrn.1834803

Robert Eric Wright (Contact Author)

Augustana College - Division of Social Sciences ( email )

2001 Summit Ave.
Sioux Falls, SD 57197
United States
605-274-5312 (Phone)

HOME PAGE: http://faculty.augie.edu/~rwright/

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