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The profitability of small single-market banks in an era of multi-market banking

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  • Hannan, Timothy H.
  • Prager, Robin A.

Abstract

This paper examines the relationship between the profitability of small single-market banks and the presence in the market of large banking organizations and banking organizations that operate primarily outside of the local banking market. We find that, in rural banking markets, the profitability of small single-market banks is significantly related to the presence of both large and small primarily-out-of-market banks. We also find that an increased presence of large or small primarily-out-of-market banks in rural banking markets reduces the positive effect of an increase in concentration on small single-market bank profits. This finding is consistent with theoretical predictions reported in the recent literature and has important implications for antitrust policy. In urban banking markets, we find little evidence of any relationship between the profitability of small single-market banks and the presence of large or primarily-out-of-market banks.

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  • Hannan, Timothy H. & Prager, Robin A., 2009. "The profitability of small single-market banks in an era of multi-market banking," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 263-271, February.
    • Handle: RePEc:eee:jbfina:v:33:y:2009:i:2:p:263-271
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    References listed on IDEAS

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