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Identifier to cite or link to this item: https://hdl.handle.net/10086/27315

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Title
Bank Entry Mode, Labor Market Flexibility and Economic Activity
Creator
Creator Name
Wang, Teng Wang, Teng
Affiliation
Affiliation Name
Erasmus University
Key Word
Bank entry
Economic activity
Labor market flexibility
JEL
G21
J24
O16
Abstract
In this paper, I investigate whether information accessibility in the target market influences the mode in which out-of-state banks enter the new market following the U.S. interstate banking deregulation and consequently affects local economic activity. I exploit heterogeneity in legal enforcement of non-compete covenants across states and over time as exogenous variations in the key channel through which an out-of-state bank could gain access to local information: the mobility of local incumbent bank employees. The findings show that banks enter new markets by establishing new branches after the relaxation of non-compete enforcement in the target market, while they enter by acquiring incumbent banks’ branches after the enforcement becomes restrictive in the target market. Interestingly, only bank entries via new branches significantly increase bank competition, improve the availability of credit to small businesses, and facilitate economic growth. The findings highlight the critical role of labor market flexibility in influencing financial development and economic growth.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2015-06
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
HIT-REFINED Working Paper Series ; No. 25
Relation
Related Identifier
URI
  http://www.ier.hit-u.ac.jp/hit-refined/
Number of Pages
48
Sponsorship
基盤研究(S) = Grants-in-Aid for Scientific Research (S)
Appears in Collections
Working Paper Series / Real Estate Markets, Financial Crisis, and Economic Growth An Integrated Economic Approach
URL
https://hdl.handle.net/10086/27315