The purpose of this paper is to provide evidence on the following question: Are there more banking offices available per person to furnish consumer and business services in branch banking states than in unit banking states? This question is a central part of a broader issue of what limitations should be placed on the ability of individual banks to branch. Indeed, in a recent review of the literature dealing with the branching question, and prepared for the Senate Banking Committee (McIntyre Committee), Guttentag [8] stated: “One of the most pervasive arguments for branch banking is that branch banks provide more office facilities than unit banking.” Yet the available evidence on the question is sparse and existing research contains methodological difficulties which make the findings of questionable value.

J. Clay Singleton, Joseph R. Lauer, The Implications of Recursiveness in Capital Markets--Theory and Empirical Tests, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 1 (Mar., 1979), pp. 59-76

The commercial banking industry has been buffeted by a variety of forces in recent years. Alternating periods of intense monetary restraint and the severity of the 1973–74 economic contraction (especially as it affected the real estate industry), huge losses on loan portfolios, a heavy commitment of funds to less developed countries on the part of a few major banks, and the failures of a number of individual banks have created considerable discussion about the stability of the banking system. Questions have been raised about the risk involved in committing funds to the securities of banking organizations. Moreover, the importance of these questions has been underscored for bank management by the necessity for many banking organizations to raise substantial amounts of external funds to prevent further depletion of existing capital ratios.

Recently, the appropriateness of the weighted average cost of capital for making decisions on capital structure and the selection of projects has been seriously questioned. Arditti [1] showed that when project lives were finite, the weighted average cost of capital was not appropriate for valuing the firm. Beranek [2] demonstrates that when the objective is shareholder wealth maximization, the appropriate discount rate for capital budgeting decisions for finite lived projects n > 1 is not the traditional weighted average cost of capital.

According to a now classic study of stock market price behavior by Fama [6], the empirical distributions of daily log price relatives are usually stable Paretian, non-Gaussian. However, there appears to have been substantial reluctance to accept Fama's [6] research results as indicative of a fundamental return generating process which is stable Paretian, non-Gaussian. Blattberg and Gonedes [1], Clarke [4], Officer [18], Praetz [19], and Press [20] have each in their own way questioned the Fama [6] results. Most recently Hsu, Miller, and Wichern (HMW) [13] have suggested that in periods of homogeneous activity for a firm the empirical distribution of rates of return on a common share may be Gaussian, in other words, that the fundamental return generating process may be normal.

R. Burr Porter, Roger C. Pfaffenberger, Efficient Algorithms for Conducting Stochastic Dominance Tests on Large Numbers of Portfolios: Reply, The Journal of Financial and Quantitative Analysis, Vol. 10, No. 1 (Mar., 1975), pp. 181-185

The comment by Linke and Kim correctly observes that the assumption regarding the maintenance of constant proportional use of capital sources is not appropriate for our argument and should be deleted. As our analysis did not make use of this assumption, the two conclusions hold.1. The weighted average cost of capital calculated with the usual weights (original capital structure proportions) is not in general equal to the discount rate which equates the current value of the firm to the present value of future cash flows.2. The above conclusion holds for any weights which can be constructed from the cash flows.

Many of the typical problems encountered in forecasting a time series are alleviated when the series follows a seasonal pattern. The seasonal effect is independent of a long-term trend and cyclic effect. Furthermore, since the seasonal effect is recurrent and periodic, it is predictable. Thus, when the time series follows a seasonal pattern, the general shape of the series is known. Questions regarding the growth trend of the series, the expansion and contraction of the seasonal pattern, and random variation affecting the series are, however, left unanswered.

The weighted average cost of capital is a widely used concept in the theoretical literature of finance as well as in the analysis of capital expenditures of business firms. The importance of the concept derives from its use as the cutoff point for investment in capital projects and as an indicator of optimal capital structure. Differences between the weighted average cost of capital and the true overall cost of capital are typically attributed to deviations of market values from book values, changes in the proportional use of specific capital sources, or alterations in the risk characteristics of the stream of payments to owners and creditors. This paper abstracts from the aforementioned problems to focus on the mathematical error of using weighted average cost of capital to represent the true overall capital cost. It is determined that, in general, the calculation of weighted average cost leads to an erroneous value of the minimum acceptable level of return. The fault lies in the general inability to express the root(s) of a polynomial as an algebraic combination of the roots of other related polynomials.

G. A. Whitmore, Lloyd R. Amey, Capital Budgeting Under Rationing: Comments on the Lusztig and Schwab Procedure, The Journal of Financial and Quantitative Analysis, Vol. 8, No. 1 (Jan., 1973), pp. 127-135