Bank integration and financial constraints: evidence from U.S. firms

No 925, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper uses data on publicly-traded firms in the U.S. to analyze the effect of interstate bank integration on the financial constraints borrowers face. A firm-level investment equation is estimated in order to test if bank integration reduces the sensitivity of capital expenditures to the level of internal funds. The staggered deregulation of cross-state bank acquisitions that took place in the U.S. between 1978 and 1994 helps estimate the model. Integration decreases financing constraints for bank-dependent firms. The change in firms' access to external finance is explained by an increase in the share of locally headquartered geographically diversified banks.

Keywords: Banks and banking; Interstate banking (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ban, nep-bec and nep-fmk
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:925

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