Regulatory Competition and Cross-Fertilization in the US Banking Markets

Abstract

We examine empirically cross-fertilization in the productivity growth of banks between a state and its neighboring and non-neighboring states before (1971-1977) and during (1982-1995) the interstate multibank holding company (IMBHC) deregulations, upon which, cross-border bank M&As, mainly among neighboring states, could enhance cross-fertilization by injecting new blood and awakening the market for corporate control. Results show that cross-fertilization in bank performance, observed among neighboring states during 1971-1977, gets stronger during 1982-1995.