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Dynamic returns to scale and geography in U.S. banking

Author

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  • Anthony J. Glass
  • Karligash Kenjegalieva
Abstract
We observe spatial cost dependence among medium‐sized and large U.S. banks (1998Q1–2020Q4). We contribute to the literature by accounting for this using an accessible dynamic spatial econometric cost model. For a movement along a bank's output expansion path, we calculate the cost returns that spillover to/from the bank. The noticeable impacts of the 2020 COVID pandemic are on the spillover cost returns and not the own returns. These spillover returns suggest the pandemic led to the smallest (largest) banks becoming suboptimally smaller (bigger). A number of banks with high‐ranking spillover returns have geographically concentrated branches and/or specialize in particular activities. Se observó una dependencia espacial de los costos entre los bancos estadounidenses medianos y grandes (1998T1–2020T4). El artículo contribuye a la bibliografía al tener en cuenta este hecho mediante un modelo econométrico espacial de costos dinámico y accesible. Para un movimiento a lo largo de la estrategia de expansión de la producción de un banco, se calculan los rendimientos de costos que hacen spillover hacia/desde el banco. Las repercusiones notables de la pandemia de COVID de 2020 se producen en los rendimientos de los costos indirectos y no en los rendimientos propios. Estos rendimientos de los spillovers sugieren que la pandemia llevó a los bancos más pequeños (más grandes) a ser subóptimamente más pequeños (más grandes). Varios bancos con altos rendimientos de spillovers tienen sucursales concentradas geográficamente o que se especializan en actividades concretas. 本稿では、米国の中規模および大規模銀行のコストの空間依存性を観察する(1998年の第一四半期~2020年の第四四半期)。利用しやすい動的空間計量経済コストモデルを用いてこれを説明し本分野の研究に貢献する。銀行のアウトプット拡張経路に沿った動きに関して、銀行から、又は銀行へのスピルオーバーのコストリターンを計算する。2020年の新型コロナウイルス感染症のパンデミックによる顕著な影響は、自己へのリターンではなく、スピルオーバーのコストリターンに対するものである。こうしたスピルオーバーのリターンから、パンデミックにより最小規模(又は最大規模)の銀行が最適ではない規模にまで縮小(又は拡大)させられたことが示唆される。スピルオーバーのリターンの高い上位銀行の多くは、支店が地理的に集中しているか、特定の活動に特化している。

Suggested Citation

  • Anthony J. Glass & Karligash Kenjegalieva, 2023. "Dynamic returns to scale and geography in U.S. banking," Papers in Regional Science, Wiley Blackwell, vol. 102(1), pages 53-85, February.
    • Handle: RePEc:bla:presci:v:102:y:2023:i:1:p:53-85
    DOI: 10.1111/pirs.12713
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