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Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition
Author(s) -
GARMAISE MARK J.,
MOSKOWITZ TOBIAS J.
Publication year - 2006
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2006.00847.x
Subject(s) - deregulation , spillover effect , property crime , monetary economics , competition (biology) , causation , business , economics , financial system , market economy , violent crime , macroeconomics , ecology , criminology , sociology , biology , political science , law
Using a unique sample of commercial loans and mergers between large banks, we provide micro‐level (within‐county) evidence linking credit conditions to economic development and find a spillover effect on crime. Neighborhoods that experience more bank mergers are subject to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years. The elasticity of property crime with respect to merger‐induced banking concentration is 0.18. We show that these results are not likely due to reverse causation, and confirm the central findings using state branching deregulation to instrument for bank competition.