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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Are Branch Banks Better Survivors? Evidence from the Depression Era
Mark Carlson

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 banks.

Keywords: Branch banking, Great Depression

Full paper (162 KB PDF)

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Last update: December 7, 2001