Finance and Efficiency: Do Bank Branching Regulations Matter?

Viral Acharya, Jean Imbs and Jason Sturgess

Review of Finance, 2011, vol. 15, issue 1, 135-172

Abstract: We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across sectors, with end effects on state-level volatility. The change cannot be explained simply by shifts in sector-level returns and volatility. A reallocation effect is at play, which we study in the context of mean-variance portfolio theory applied to sectoral returns. We find the reallocation is particularly strong in sectors characterized by young, small and external finance dependent firms, and for states that have a larger share of such sectors. The findings suggest that improving bank access to branching affects the sectoral specialization of output, in a manner that depends on the variance-covariance properties of sectoral returns, rather than on their average only. Copyright 2011, Oxford University Press.

Date: 2011
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Related works:
Working Paper: Finance and Efficiency: Do Bank Branching Regulations Matter? (2007)
Working Paper: Finance and Efficiency: Do Bank Branching Regulations Matter? (2007)
Working Paper: Finance and Efficiency: Do Bank Branching Regulations Matter? (2006)
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