Regional Competition in US Banking – Trends and Determinants

Alexander Erler¹, Horst Gischer² and Bernhard Herz^1,

¹Department of Business, Economics and Law, University of Bayreuth, Bayreuth, Germany

²University of Magdeburg, Magdeburg, Germany

Cite this paper:
Alexander Erler, Horst Gischer and Bernhard Herz. Regional Competition in US Banking – Trends and Determinants. Journal of Finance and Economics. 2018; 6(5):162-172. doi: 10.12691/jfe-6-5-1

Abstract

Competition in the US banking industry as measured by the Lerner Index has on average increased substantially during the last decade. At the same time, regional differences in competition on the state level have decreased considerably. Based on a dynamic panel framework we find that these developments are mainly driven by industry specific factors such as the costs to income ratio. The empirical evidence indicates that inefficiency and the Lerner index are significant negatively correlated. Macroeconomic conditions appear to have supported these trends in competition, however, to a somewhat lesser extent.

Keywords:
competition US banking efficiency regional markets

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