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Holding company affiliation versus branching by independent banks: A cost analysis for interstate banking

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  • Joyce T. Chen
  • Chong‐Tong Chen
  • Rasoul Rezvanian

Abstract

Prohibition of interstate branching forced nearly all banks interested in interstate expansion to establish holding company affiliations. But it is not clear whether holding‐company affiliation or branching by independent banks is preferable for consumers. By contrasting 1994 data of consolidated multibank holding companies with that of independent banks with branches, we assess their relative scale economies and cost advantages by asset size. Our analysis supports the assertion of the U. S. Department of Treasury that expansion through interstate branching would provide immediate cost savings and increase consumer benefits.

Suggested Citation

  • Joyce T. Chen & Chong‐Tong Chen & Rasoul Rezvanian, 1998. "Holding company affiliation versus branching by independent banks: A cost analysis for interstate banking," Review of Financial Economics, John Wiley & Sons, vol. 7(1), pages 87-101.
    • Handle: RePEc:wly:revfec:v:7:y:1998:i:1:p:87-101
    DOI: 10.1016/S1058-3300(99)80147-5
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