Competitive Dynamics of Deregulation: Evidence from U.S. Banking

34 Pages Posted: 15 Nov 2002

See all articles by Kevin J. Stiroh

Kevin J. Stiroh

Federal Reserve Bank of New York

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Abstract

This paper examines the impact of increased competition from deregulation on the dynamics of the U.S. banking industry. We find the link between a bank's relative performance and its subsequent market share growth strengthens significantly after deregulation as competitive reallocation effects transfer assets to better performers. Exit dynamics also change in ways consistent with the disciplinary role of competition. The net effect is a substantial reallocation of market share toward better banks. We conclude that earlier regulation of U.S. banks blunted this market mechanism and seriously hindered the competitive process.

JEL Classification: G21

Suggested Citation

Stiroh, Kevin J. and Strahan, Philip E., Competitive Dynamics of Deregulation: Evidence from U.S. Banking. Journal of Money, Credit and Banking, Forthcoming. Available at SSRN: https://ssrn.com/abstract=333621 or http://dx.doi.org/10.2139/ssrn.333621

Kevin J. Stiroh

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6633 (Phone)
(212) 720-8363 (Fax)

Philip E. Strahan (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
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Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www2.bc.edu/~strahan

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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