The Effects of Geographic Expansion on Bank Efficiency

44 Pages Posted: 17 Jan 2001

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Robert DeYoung

University of Kansas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 2000

Abstract

We assess the effects of geographic expansion on bank efficiency using cost and profit efficiency for over 7,000 U.S. banks, 1993-1998. We find that parent organizations exercise some control over the efficiency of their affiliates, although this control tends to dissipate with distance to the affiliate. However, on average, distance-related efficiency effects tend to be modest, suggesting that some efficient organizations can overcome any effects of distance. The results imply there may be no particular optimal geographic scope for banking organizations some may operate efficiently within a single region, while others may operate efficiently on a nationwide or international basis.

Keywords: Banks, efficiency, mergers, financial institutions

JEL Classification: G21, G28, G34, G38

Suggested Citation

Berger, Allen N. and DeYoung, Robert, The Effects of Geographic Expansion on Bank Efficiency (November 2000). FEDS Working Paper No. 01-03; FRB Chicago Working Paper No. 2000-14. Available at SSRN: https://ssrn.com/abstract=256716 or http://dx.doi.org/10.2139/ssrn.256716

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
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803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

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European Banking Center

P.O. Box 90153
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Netherlands

Robert DeYoung

University of Kansas School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-1806 (Phone)

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