Why are bank profits so persistent: the roles of product market competition, informational opacity, and regional/macroeconomic shocks

Allen Berger (), Seth D. Bonime, Daniel M. Covitz and Diana Hancock
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Daniel M. Covitz: https://www.federalreserve.gov/econres/daniel-m-covitz.htm

No 1999-28, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We investigate how banking market competition, informational opacity, and sensitivity to shocks have changed over the last three decades by examining the persistence of firm-level rents. We develop propagation mechanisms with testable implications to isolate the sources of persistence. Our analysis suggests that different processes underlie persistent performance at the high and low ends of the distribution. Our tests suggest that impediments to competition and informational opacity continue to be strong determinants of performance; that the reduction in geographic regulatory restrictions had little effect on competitiveness; and that performance remains sensitive to regional/macroeconomic shocks. The findings also suggest reasons for the recent record profitability of the industry.

Keywords: Banking market; Bank profits (search for similar items in EconPapers)
Date: 1999
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Journal Article: Why are bank profits so persistent? The roles of product market competition, informational opacity, and regional/macroeconomic shocks (2000)
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