The Impacts of Competition on Bank Risk: Evidence from Geographic Bank Deregulation
49 Pages Posted: 23 Aug 2019 Last revised: 1 Mar 2022
Date Written: August 21, 2019
The impacts of competition on bank risk are complex and important issues without consensus in the research literature. We shine an empirical spotlight on these issues using three different U.S. geographic deregulation shocks to bank competition, yielding findings that are robust to instrumental variables and other identification checks. Our results are nuanced and vary by type of deregulation – intrastate banking, interstate banking, and interstate branching deregulation – consistent with the fact that these shocks affect bank competition in different ways. In contrast to prior research focusing on large banks, we investigate and find important differences in results by bank size class.
Keywords: Deregulation, Risk, Intrastate Branching, Interstate Banking, Interstate Branching, Diversification, Competition.
JEL Classification: G21, G28, D22
Suggested Citation: Suggested Citation