Keywords: Bank, persistence, profits, regulation
Abstract: We investigate how banking market competition, informational
opacity, and sensitivity to shocks have changed over the last
three decades by examining the persistence of firm-level rents.
We develop propagation mechanisms with testable implications to
isolate the sources of persistence. Our analysis suggests that
different processes underlie persistent performance at the high
and low ends of the distribution. Our tests suggest that
impediments to competition and informational opacity continue to
be strong determinants of performance; that the reduction in
geographic regulatory restrictions had little effect on
competitiveness; and that performance remains sensitive to
regional/macroeconomic shocks. The findings also suggest reasons
for the recent record profitability of the industry.
Full paper (3078 KB PDF)
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Last update: June 30, 1999