EconPapers    
Economics at your fingertips  
 

Does the geographic expansion of banks reduce risk?

Martin Goetz, Luc Laeven and Ross Levine ()

Journal of Financial Economics, 2016, vol. 120, issue 2, 346-362

Abstract: We develop a new identification strategy to evaluate the impact of the geographic expansion of a bank holding company (BHC) across US metropolitan statistical areas (MSAs) on BHC risk. For the average BHC, the instrumental variable results suggest that geographic expansion materially reduces risk. Geographic diversification does not affect loan quality. The results are consistent with arguments that geographic expansion lowers risk by reducing exposure to idiosyncratic local risks and inconsistent with arguments that expansion, on net, increases risk by reducing the ability of BHCs to monitor loans and manage risks.

Keywords: Banking; Bank regulation; Financial stability; Risk; Hedging (search for similar items in EconPapers)
JEL-codes: G11 G21 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (121)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X1600026X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does the Geographic Expansion of Banks Reduce Risk? (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:120:y:2016:i:2:p:346-362

DOI: 10.1016/j.jfineco.2016.01.020

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-23
Handle: RePEc:eee:jfinec:v:120:y:2016:i:2:p:346-362