Financial integration, banking performance, and economic *growth: An analysis of the effects of intrastate branching and interstate banking.

摘要

This dissertation introduces alternative continuous measures of financial integration among banking markets within and across state borders. These alternatives are compared to the traditional measures common in the literature and are used to investigate the relationship between financial integration, banking performance, and economic growth across states during 1972--92 and 1969--97. Traditional dummy variables used to represent degrees of financial integration in different jurisdictions are based on appraisals of legislation and force one to arbitrarily represent states as either fully open or closed to intrastate branching and interstate banking. Thus, dummy variables fail to reflect that states may be in intermediate situations between unit banking and de novo statewide branching, that change may be fast or slow, and that the observed nominal state of legislation may not adequately reflect the situation in the actual banking market.;The measures introduced in this study can reflect the degree of financial integration present in the actual marketplace. The advantage associated with using continuous measures is that observations do not need to be arbitrarily separated into discrete groups. Also, results from models using these continuous measures enable one to more accurately predict the effects of further financial integration by taking into account the initial level and the degree of additional integration that may be expected in a state.;The ratio of branches to banks (or to population) in each state/year is used to represent the degree of financial integration across banking markets at the intrastate level. The percentage of deposits controlled by out-of-state multibank holding companies in each state is used to represent financial integration at the interstate level. This dissertation uses both an ordinary least squares and a weighted least squares fixed effects panel data technique.;The results obtained provide additional evidence to the finance-growth debate and support the hypothesis that financial development does not simply coincide with, but rather causes higher economic growth rates. Higher degrees of intrastate financial integration are consistently associated with higher economic growth rates. Greater interstate financial integration is found to be associated with higher economic growth rates only in some cases. Financial integration is also found to produce results consistent with increasingly competitive markets. Specifically, greater financial integration is associated with lower bank operating costs, lower interest rates, higher rates of lending growth, no increases in profitability, and increases in lending quality.