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Profit Differentials Between Canadian and U.S. Commercial Banks: the Role of Regulation

Published online by Cambridge University Press:  03 March 2009

Mark W. Nichols  and
Jill M. Hendrickson
Mark W. Nichols
Affiliation:
Assistant Professor of Economics at the University of Nevada, Reno, NV 89557
Jill M. Hendrickson
Affiliation:
Assistant Professor of Economics at the University of the South, Sewanee, TN 37383
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Abstract

Using annual data on nationally chartered U.S. and Canadian banks from 1929 to 1989, this article empirically evaluates the impact of various regulations on bank profitability. An intercountry comparison reveals that the less restrictive regulatory environment in Canada has historically resulted in higher bank profits. Specifically, higher leverage, greater securities investment and lending opportunities, and the freedom to establish branch units all significantly contribute to higher bank profitability in Canada. Evidence presented also shows that U.S. banks would have been more profitable over the sample period in a regulatory environment similar to Canada's.

Type
Articles
Information
The Journal of Economic History , Volume 57 , Issue 3 , September 1997 , pp. 674 - 696
Copyright
Copyright © The Economic History Association 1997

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