Finance and efficiency: Do bank branching regulations matter

Viral V. Acharya, Jean Imbs, Jason Sturgess

Research output: Contribution to journalArticlepeer-review


We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across sectors, with end effects on state-level volatility. The change cannot be explained simply by shifts in sector-level returns and volatility. A reallocation effect is at play, which we study in the context of mean-variance portfolio theory applied to sectoral returns. We find the reallocation is particularly strong in sectors characterized by young, small and external finance dependent firms, and for states that have a larger share of such sectors. The findings suggest that improving bank access to branching affects the sectoral specialization of output, in a manner that depends on the variance-covariance properties of sectoral returns, rather than on their average only.

Original languageEnglish (US)
Pages (from-to)135-172
Number of pages38
JournalReview of Finance
Issue number1
StatePublished - Jan 2011

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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