MANAGERIAL MOTIVES, MARKET STRUCTURES AND THE PERFORMANCE OF HOLDING COMPANY BANKS

Since the late 1960's bank holding companies have become a dominant force in U. S. banking; they now account for over 2/3 of the nation's total deposits. This paper tests the hypothesis that the holding company form of organization leads to relatively risk‐taking behavior by affiliated banks. A major finding is that holding company banks react to monopolistic market situations by choosing risker portfolios and by leveraging to a greater extent than their independent counterparts. Such a behavioral characteristic has important implications for the allocation of resources in the country's 2600 local banking markets and for the regulation of financial institutions in general.