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Banking Geography and Cross-Fertilization in the Productivity Growth of US Commercial Banks

Dogan Tirtiroglu (), A. Basak Tanyeri (), Ercan Tirtiroglu () and Kenneth Daniels
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Dogan Tirtiroglu: The University of Adelaide, Business School, Australia
A. Basak Tanyeri: Bilkent University, Faculty of Business Administration Ankara, Turkey
Ercan Tirtiroglu: The University of Adelaide, Business School, Australia

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: The US banking industry offers a unique, natural and fertile environment to study geography's effects on banks' behavior and performance. The literature on banks' operating performance, while extensive, says little about the influence of spatial interactions on banks' performance. We compute and examine, using a physical distance-based spatio-temporal empirical model, the state-wide total factor productivity growth (TFPG) indices of US commercial banks for each state for the 1971-1995 period. We observe that the productivity growth of commercial banks in state i depends strongly, positively, and contemporaneously on the productivity growth of commercial banks located in state i's contiguous states. Further, “regulatory space” appears to induce frictions and lessen the documented spatial interactions. These findings support our plea that research on commercial banking sector's behavior need to pay a particular attention to the effects of banking geography.

Keywords: Spatial; Commercial Banks; Total Factor Productivity Growth; Kalman Filter (search for similar items in EconPapers)
JEL-codes: D24 C23 G21 G28 K23 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-04
New Economics Papers: this item is included in nep-ban, nep-eff, nep-geo and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1108

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