Competition and Bank Risk: Evidence from Geographic Bank Deregulation

48 Pages Posted: 23 Aug 2019

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

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Herman Saheruddin

University of South Carolina - Department of Finance

Date Written: August 21, 2019

Abstract

We examine the effects of competition on bank risk. We find strong evidence that interstate banking deregulation — which generally increases bank competition — is associated with lower bank risk and some evidence intrastate branching increases bank risk. Further, interstate banking reduces bank risk more in sparsely populated states. Additional analyses suggest that in contrast to previous studies that focus on large banks, the impact of interstate banking deregulation on bank risk is driven by small banks, with strong small banks having lower risk after interstate banking. However, intrastate branching deregulation is associated with higher risk for small and medium banks.

Keywords: Deregulation, Risk, Intrastate Branching, Interstate Banking, Interstate Branching, Diversification, Competition

JEL Classification: G21, G28, D22

Suggested Citation

Berger, Allen N. and El Ghoul, Sadok and Guedhami, Omrane and Saheruddin, Herman, Competition and Bank Risk: Evidence from Geographic Bank Deregulation (August 21, 2019). Available at SSRN: https://ssrn.com/abstract=3440918 or http://dx.doi.org/10.2139/ssrn.3440918

Allen N. Berger

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

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

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

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

Columbia, SC
United States

Herman Saheruddin

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
32
Abstract Views
144
PlumX Metrics