A Tobit Analysis of Determinants of Geographic Differentials in the Commercial Bank Closing Rate in the United States

This study empirically identifies factors that influenced geographic differentials in the bank closing rate in the United States over the period 1982 through 1990. Given the presence of censored data, the model adopts the tobit estimation procedure. The bank closing rate in a state is found to be an increasing function of the average commercial bank cost of deposits, the percent of gross state product that derives from oil and natural gas extraction, net charge-offs as a percent of outstanding loans, and the presence of unit banking legislation in the state. The bank closing rate is also found to be a decreasing function the inflation rate of housing.