The effects of big-bank presence on the profit efficiency of small banks in rural markets

Ken B. Cyree and W. Paul Spurlin

Journal of Banking & Finance, 2012, vol. 36, issue 9, 2593-2603

Abstract: Because big banks could impact competition in rural markets, we investigate the effects of big-bank presence on the performance of rural, small banks. When competing against a big bank, rural one-county banks operate at lower levels of proit efficiency, but with higher ROA and increased levels of interest and fee income from loans. Lower profit efficiency and higher returns in the rural markets suggest that big banks possess market power in rural markets and that they can extract rents to earn higher returns with lower than average profit efficiency. Therefore, small banks in rural markets should not fear large competitors. Conversely, customers who rely on loans from rural, small banks are negatively impacted by higher rates and fees on loans when a big bank is present in the market.

Keywords: Profit efficiency; Market power; Rural banking; Bank competition (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426612001434
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:9:p:2593-2603

DOI: 10.1016/j.jbankfin.2012.05.015

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().