Keywords: Branch banking, Great Depression
Abstract: It is widely argued in the literature on the Great Depression that the
prevalence of unit banks aggravated the problem of financial
instability that afflicted the country. This paper tests the theory
that more widespread branch banking would have reduced financial
turbulence in the United States by examining the survival of
individual branch and unit banks. Results indicate that instead of
being more likely to survive, branch banks were more likely to fail.
Further investigation suggests that this higher failure rate occurred
because branch banks systematically held riskier portfolios than unit
Full paper (162 KB PDF)
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Last update: December 7, 2001