Finance and efficiency: Do bank branching regulations matter

Viral V. Acharya, Jean Imbs, Jason Sturgess

Research output: Contribution to journalArticle

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. The change cannot be explained simply by shifts in sector-level returns and volatility. A reallocation effect is at play, which we study in the context of mean-variance portfolio theory applied to sectoral returns. We find the reallocation 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. The findings suggest that improving bank access to branching affects the sectoral specialization of output, in a manner that depends on the variance-covariance properties of sectoral returns, rather than on their average only.

Original languageEnglish (US)
Pages (from-to)135-172
Number of pages38
JournalReview of Finance
Volume15
Issue number1
DOIs
StatePublished - Jan 1 2011

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Finance
Reallocation
Bank regulation
Deregulation
Mean-variance portfolios
External finance
Portfolio theory

ASJC Scopus subject areas

  • Finance

Cite this

Finance and efficiency : Do bank branching regulations matter. / Acharya, Viral V.; Imbs, Jean; Sturgess, Jason.

In: Review of Finance, Vol. 15, No. 1, 01.01.2011, p. 135-172.

Research output: Contribution to journalArticle

Acharya, Viral V. ; Imbs, Jean ; Sturgess, Jason. / Finance and efficiency : Do bank branching regulations matter. In: Review of Finance. 2011 ; Vol. 15, No. 1. pp. 135-172.
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