The Efficiency of Capital Allocation: Do Bank Regulations Matter?
Journal article: 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.
Author(s)
Viral V. Acharya, Jean Imbs, Jason Sturgess
Journal
- Review of Finance
Date of publication
- 2011
Keywords JEL
Keywords
- Financial development
- Growth
- Volatility
- Diversification
- Deregulation
- Liberalization
- Mean-variance efficiency
Pages
- 135-172
URL of the HAL notice
Version
- 1
Volume
- 15