English, Article edition: OPTIMAL BANKING STRUCTURE: IMPLICATIONS FOR INTERSTATE BANKING RICHARD W. NELSON

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Bookmark: http://trove.nla.gov.au/version/183611
Physical Description
  • article
Language
  • English

Edition details

Title
  • OPTIMAL BANKING STRUCTURE: IMPLICATIONS FOR INTERSTATE BANKING
Author
  • RICHARD W. NELSON
Physical Description
  • article
Notes
  • This paper assesses the implications for the banking industry of relaxing interstate branching prohibitions. Theoretical models suggest that the number, size distribution, and specialization of firms in an industry are determined so as to minimize costs of production. Analysis presented here shows that interstate branching prohibitions, or their removal, are likely to affect costs only if the "convenience" of office location is important and if significant economies of scale are associated with office expansion. These conditions apparently do not hold in either retail banking or wholesale banking. The paper concludes that productive efficiency alone will not force a major consolidation of the banking system when branching restrictions are eliminated. To the extent that a consolidation does occur, it likely will reflect factors not considered in our model. These factors include (1) possibilities for increased diversification with greater size, (2) scarce managerial resources, (3) managerial incentives to maximize the organization's size, and (4) demand for multi-office banking. Copyright 1988 Western Economic Association International.
  • RePEc:bla:coecpo:v:6:y:1988:i:2:p:13-23
Language
  • English
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