The Impacts of Competition on Bank Risk: Evidence from Geographic Bank Deregulation

49 Pages Posted: 23 Aug 2019 Last revised: 1 Mar 2022

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business

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

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

Berger, Allen N. and El Ghoul, Sadok and Guedhami, Omrane and Saheruddin, Herman, The Impacts of Competition on 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 )

1014 Greene St.
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

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

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