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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Technological Progress and the Geographic Expansion of the Banking Industry
Allen N. Berger and Robert DeYoung

Abstract: We test some predictions about the effects of technological progress on geographic expansion using data on banks in U.S. multibank holding companies over 1985-1998. Specifically, we test whether over time (a) parental control over affiliate banks has increased, and (b) the agency costs associated with distance from the parent have decreased. The data suggest that banking organizations exercise significant control over affiliates that has been increasing over time, and that the agency costs associated with distance have decreased somewhat over time. The findings are consistent with the hypothesis that technological progress has facilitated the geographic expansion of the banking industry.

Keywords: Banks, efficiency, mergers, productivity, technological progress

Full paper (309 KB PDF)

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Last update: July 2, 2002