Munich Personal RePEc Archive

Is the Traditional Banking Model a Survivor?

Chiorazzo, Vincenzo and D'Apice, Vincenzo and DeYoung, Robert and Morelli, Pierluigi (2018): Is the Traditional Banking Model a Survivor? Published in: Journal of Banking and Finance , Vol. 97, (December 2018): pp. 238-256.

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We test whether small US commercial banks that use a traditional business model are more likely to survive than non-traditional banks during both good and bad economic climates. Our concept of bank survival is derived from Stigler (1958) and includes any bank that does not fail or is not acquired. We define traditional banking by four hallmark characteristics: Relationship loans, core deposit funding, revenue streams from traditional banking services, and physical bank branches. Banks that adhered more closely to this business strategy were an estimated 8 to 13 percentage points more likely to survive from 1997 through 2012 compared to other small banks using less traditional business strategies. This survival advantage approximately doubled during the financial crisis period.

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