Entry, Exit and Growth of US Commercial Banks

36 Pages Posted: 21 Feb 2014

See all articles by John Goddard

John Goddard

Bangor Business School

Hong Liu

University of Aberdeen

John O. S. Wilson

University of St. Andrews

Date Written: February 20, 2014

Abstract

We investigate the entry, exit and growth of commercial banks in the United States (US) during the period 1984-2012. Hazard function estimations for the probability of exit via acquisition and failure, and cross-sectional growth regressions examine the impact of exit through merger and acquisition (M&A) or failure, and internally-generated growth. The hazard of disappearance via acquisition is inversely to asset size and quality, profitability, managerial efficiency and capitalization, and positively related to liquidity. Small banks with a higher proportion of their assets in lending, and small banks with high credit risk, are more likely to fail. We report evidence of an inverse relationship between bank size and growth, and some evidence of persistence in growth performance from one year to the next among smaller banks.

Keywords: Acquisition, Commercial Banks, Community Banks, Entry, Failure, Gibrat’s Law, Mergers, Sample selection models

JEL Classification: G21, L11

Suggested Citation

Goddard, John and Liu, Hong and Wilson, John O. S., Entry, Exit and Growth of US Commercial Banks (February 20, 2014). Available at SSRN: https://ssrn.com/abstract=2398888 or http://dx.doi.org/10.2139/ssrn.2398888

John Goddard

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Hong Liu

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

John O. S. Wilson (Contact Author)

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

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