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Deregulation and Consolidation of the U.S. Banking Industry, 1976-1998

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Abstract:

The U.S. banking industry has experienced tremendous deregulation, beginning in the early 1980s. The major impact of this deregulation was purported to be the consolidation of the banking industry, through the elimination of efficient and financially unsound banks. However, the neo-classical economic assumption upon which this belief is based has not been tested. This paper tests this assumption by examining the causal factors involved in a bank’s being an acquiring bank in a merger and the causal factors involved in a bank’s being a target bank in a merger in a sample of over 3000 banks spanning the years 1976-1998. Using a combination of neo-institutional theory and resource dependence theory, this analysis suggests that banks facing internal and external sources of uncertainty are likely to be involved in merger, which was legitimated through regulation changes. Both types of merger have a similar causal structure, with the exception of size, such that large banks are more likely to be an acquiring bank and small banks are more likely to be a target bank.

Most Common Document Word Stems:

bank (226), merger (107), theori (47), depend (45), chang (40), state (39), variabl (37), resourc (36), environ (36), institut (36), financi (35), organ (34), econom (25), competit (24), year (23), organiz (23), acquir (23), unit (23), like (22), survivor (22), branch (21),

Author's Keywords:

Mergers, Organizational Theory, Banking Industry, Government Regulation
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Name: American Sociological Association
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http://www.asanet.org


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MLA Citation:

Morris, Theresa. "Deregulation and Consolidation of the U.S. Banking Industry, 1976-1998" Paper presented at the annual meeting of the American Sociological Association, Hilton San Francisco & Renaissance Parc 55 Hotel, San Francisco, CA,, Aug 14, 2004 <Not Available>. 2009-05-26 <http://www.allacademic.com/meta/p109710_index.html>

APA Citation:

Morris, T. , 2004-08-14 "Deregulation and Consolidation of the U.S. Banking Industry, 1976-1998" Paper presented at the annual meeting of the American Sociological Association, Hilton San Francisco & Renaissance Parc 55 Hotel, San Francisco, CA, Online <.PDF>. 2009-05-26 from http://www.allacademic.com/meta/p109710_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: The U.S. banking industry has experienced tremendous deregulation, beginning in the early 1980s. The major impact of this deregulation was purported to be the consolidation of the banking industry, through the elimination of efficient and financially unsound banks. However, the neo-classical economic assumption upon which this belief is based has not been tested. This paper tests this assumption by examining the causal factors involved in a bank’s being an acquiring bank in a merger and the causal factors involved in a bank’s being a target bank in a merger in a sample of over 3000 banks spanning the years 1976-1998. Using a combination of neo-institutional theory and resource dependence theory, this analysis suggests that banks facing internal and external sources of uncertainty are likely to be involved in merger, which was legitimated through regulation changes. Both types of merger have a similar causal structure, with the exception of size, such that large banks are more likely to be an acquiring bank and small banks are more likely to be a target bank.

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Document Type: .PDF
Page count: 19
Word count: 5844
Text sample:
1 Introduction Since the early 1980s the United States’ banking industry has experienced tremendous deregulation. Accompanying this deregulation has been increased competition in and consolidation of the banking and financial industry in the United States (Loevinger 1985; Rose 1997). Regulatory changes implemented through the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) the 1982 Garn-St. Germain Depository Institutions Act of 1982 and the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act increased competition in the banking industry.
Rate .017 .062** Interest Rate -.049** -.007 Domestic Competition -4.023** -5.452** Branch Banking State .746** .486** Policy Environments Policy Environment 1980-1988 Policy Environment 1989-1993 Policy Environment 1994-1998 Control Variables Bank Age -.005** .007** Bank Size .000 .000** Efficiency -.338 -.529 Unit Bank -.725** -1.687** Constant Constant -2.485** -3.616** Number of bank-years 54026 54026 *p<.05 **p<.01


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