#2236. Geographic deregulation and banks’ cost of equity capital

August 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript3510 $

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Journal’s subject area:
Finance;
Economics and Econometrics;
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Abstract:
We examine the effects of geographic deregulation on banks’ cost of equity (COE) using changes in interstate bank branching laws over the post–Riegle-Neal period (1994:Q4–20XX:Q4). We find strong evidence that deregulation increases banks’ COE. This is driven primarily by active acquirers, rather than those subject to increased competition from these acquirers. We identify higher risk-taking as an important channel for these findings. The results support our new acquisitions–fragility view, rather than the traditional competition–fragility view. Results are robust to instrumental variables, accounting for secular trends, and alternative explanations.
Keywords:
Acquisitions; Bank deregulation; Cost of equity capital; M&As; Market discipline; Risk

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