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Holding company affiliation versus branching by independent banks: A cost analysis for interstate banking
Author(s) -
Chen Joyce T.,
Chen ChongTong,
Rezvanian Rasoul
Publication year - 1998
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(99)80147-5
Subject(s) - treasury , business , branching (polymer chemistry) , assertion , asset (computer security) , economies of scale , economics , finance , monetary economics , marketing , composite material , history , programming language , materials science , computer security , archaeology , computer science
Prohibition of interstate branching forced nearly all banks interested in interstate expansion to establish holding company affiliations. But it is not clear whether holding‐company affiliation or branching by independent banks is preferable for consumers. By contrasting 1994 data of consolidated multibank holding companies with that of independent banks with branches, we assess their relative scale economies and cost advantages by asset size. Our analysis supports the assertion of the U. S. Department of Treasury that expansion through interstate branching would provide immediate cost savings and increase consumer benefits.