This paper presents evidence that the traditional banking business of accepting deposits and making loans has declined significantly in the US in recent years. There has been a switch from directly held assets to pension funds and mutual funds. However, banks have maintained their position...

Throughout the past year, on-site visits to financial service firms were conducted to review and evaluate their financial risk management systems. The commercial banking analysis covered a number of North American super-regionals and quasi-money center institutions as well as several firms...

Throughout the past year, on-site visits to financial service firms were conducted to review and evaluate their risk management systems. In the insurance sector, this evaluation covered a number of prominent life/health and property/casualty insurers, both in the U.S. and abroad. The information...

For nearly two decades banks in the United States have consolidated in record numbers—in terms of both frequency and the size of the merging institutions. Rhoades (1996) hypothesizes that the main motivations were increased potential for geographic expansion created by changes in state laws...

Over the past several years, substantial research effort has gone into measuring the efficiency of financial institutions. Many studies have found that inefficiencies are quite large, on the order of 20% or more of total banking industry costs and about half of the industry's potential profits....

A financial system is fragile if a small shock has a large effect. Sunspot equilibria, where the endogenous variables depend on extrinsic uncertainty, provide an extreme illustration. However, fundamental equilibria, where outcomes depend only on intrinsic uncertainty, can also be fragile. We...

Financial innovation has been described as the "life blood of efficient and responsive capital markets." Yet, there have been few quantitative investigations of financial innovation and the diffusion of these new technologies. Of the latter, there have been only three prior quantitative studies,...

In this study we consider the linkage between productivity change and profit change. We develop an analytical framework in which profit change between one period and the next is decomposed into three sources: (i) a productivity change effect (which includes a technical change effect and an...

This paper derives the optimal size of the financial sector using a general equilibrium framework that is an extension of Holmstrom and Tirole's 1997 paper. We show that the financial sector has a unique optimal size relative to the size of the economy as a whole. Creating and maintaining this...

Using financial, accounting and questionnaire response data we investigate the post-acquisition performance of 47 US bank holding companies that executed 579 mergers and acquisitions in the 1964-1996 period and compare it with their competitors' performance. The objectives of the study are to...