What Drives Banks' Geographic Expansion? The Role of Locally Non-Diversifiable Risk
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Date
2019-03-06
Author
Gropp, Reint E.
Noth, Felix
Schüwer, Ulrich
SAFE No.
246
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Abstract
We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the United States during the 1990s and 2000s. Further, our evidence shows that these banks take into account the local risks in potential target regions: they expand more into counties where risks are relatively high and positively correlated with risks in their home region. This suggests that these banks do not only diversify but also build on their expertise in local risks when they expand into new regions.
Research Area
Financial Institutions
Keywords
banking, geographic expansion, deregulation, locally non-diversifiable risk, catastrophic risk
JEL Classification
G21, G28
Topic
Corporate Finance
Saving and Borrowing
Stability and Regulation
Saving and Borrowing
Stability and Regulation
Relations
1
Publication Type
Working Paper
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- LIF-SAFE Working Papers [334]