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Profit Differentials Between Canadian and U.S. Commercial Banks: the Role of Regulation

Author

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  • Nichols, Mark W.
  • Hendrickson, Jill M.

Abstract

Using annual data on nationally chartered U.S. and Canadian banks from 1929 to 1989, this article empirically evaluates the impact of various regulations on bank profitability. An intercountry comparison reveals that the less restrictive regulatory environment in Canada has historically resulted in higher bank profits. Specifically, higher leverage, greater securities investment and lending opportunities, and the freedom to establish branch units all significantly contribute to higher bank profitability in Canada. Evidence presented also shows that U.S. banks would have been more profitable over the sample period in a regulatory environment similar to Canada's.

Suggested Citation

  • Nichols, Mark W. & Hendrickson, Jill M., 1997. "Profit Differentials Between Canadian and U.S. Commercial Banks: the Role of Regulation," The Journal of Economic History, Cambridge University Press, vol. 57(3), pages 674-696, September.
    • Handle: RePEc:cup:jechis:v:57:y:1997:i:03:p:674-696_01
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    Cited by:

    1. Cuñat, Vicente & Guadalupe, Maria, 2009. "Executive compensation and competition in the banking and financial sectors," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 495-504, March.
    2. Fiona, Tregenna, 2006. "An empirical investigation of the effects of concentration on profitability among US banks," MPRA Paper 13731, University Library of Munich, Germany, revised 2009.

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