Deregulation of Bank Entry and Bank Failures by Krishnamurthy Subramanian, Ajay Yadav :: SSRN

Deregulation of Bank Entry and Bank Failures by Krishnamurthy Subramanian, Ajay Yadav :: SSRN:

Short version: after deregulation there are fewer bank failures. 

From the paper:

"we find that deregulation of bank entry enhances bank stability by lowering instances of bank failures. Consistent with the effects being strongest in environments where the structure of banking markets changed the most, the effects are mainly due to intra-state deregulation and in states that had unit banking laws. In falsification tests, we find no effect of the deregulation on thrift failures. Furthermore, pre-existing bank failures in a state did not determine its timing of deregulation, which assures against any reverse causal effects. The reduction in bank failures seemed to result from: benefits from greater geographic diversification; and banks becoming more efficient post deregulation."

cite: Subramanian, Krishnamurthy and Yadav, Ajay, Deregulation of Bank Entry and Bank Failures (November 18, 2012). Available at SSRN: http://ssrn.com/abstract=2219809 or http://dx.doi.org/10.2139/ssrn.2219809