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http://hdl.handle.net/2451/29542
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| Title: | Finance and Efficiency: Do Bank Branching Regulations Matter? |
| Authors: | Acharya, Viral
Imbs, Jean
Sturgess, Jason |
| Issue Date: | 21-Jan-2010 |
| Series/Report no.: | FIN-09-034 |
| 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. This change in state-level volatility cannot
be explained simply by shifts in sector-level returns and volatility. A
reallocation effect is at play. To study this effect, we invoke a
benchmark allocation based on mean-variance portfolio theory applied to
sectoral returns. Wefind that the realized sectoral allocation of output
at the state-level converges towards this benchmark allocation, at a
rate that is hastened following the deregulation. This partly occurs
because sectors with zero weight in the benchmark allocation see their
share of total output shrink. We show convergence 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.
Thefindings are robust to the endogeneity of deregulation dates. They
suggest that improving bank access to branching affects the sectoral
specialization (or diversification) of output, in a manner that depends
on the variance-covariance properties of sectoral returns, rather than
on their average only. |
| URI: | http://hdl.handle.net/2451/29542 |
| Appears in Collections: | Finance Working Papers
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