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Selection in Banking

Nicola Cetorelli and Douglas Leonard
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Nicola Cetorelli: Brown University
Douglas Leonard: Federal Reserve Bank of New York, Research and Statistics Group, Financial Intermediation Function

No 20191216, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Over the past thirty years, more than 2,900 U.S. banks have transformed from pure depository institutions into conglomerates involved in a broad range of business activities. What type of banks choose to become conglomerate organizations? In this post, we document that, from 1986 to 2018, such institutions had, on average, a higher return on equity in the three years prior to their decision to expand, as well as a lower level of risk overall. However, this superior pre-expansion performance diminishes over time, and all but disappears by the end of the 1990s.

Keywords: Banking; Selection; Conglomeration (search for similar items in EconPapers)
JEL-codes: G0 G2 G21 (search for similar items in EconPapers)
Date: 2019-12-16
New Economics Papers: this item is included in nep-ban
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