This paper empirically examines contagion effects of bank failures by analyzing the behavior of deposit flows in a sample of failed and healthy banks over the 1929–1933 period. We find evidence of contagion for 1930–1932, while none seems to have existed in 1929 or 1933. In addition, the pace of contagion accelerated over 1930–1932. We find that even during 1930–1932, failing-bank deposit outflows exceeded those at a matched control sample of nonfailing banks. This finding is consistent with the presence of a significant number of informed depositors who distinguished among ex ante failing and nonfailing banks.Journal of Economic LiteratureClassification Number: G21.

This paper examines cross-subsidy, moral hazard, and bank liability issues related to the provision of federal deposit insurance by "rerunning" its implementation, i.e., determining fair premium values, over the period 1927-1932. The pre-1933 period was characterized by historically high asset-price volatility, a large number of bank failures, and a weak federal safety net. In this economic context, we find a high degree of self-insurance on the part of the banks in our sample, both in terms of higher overall capital levels and a strong correlation between capital levels and asset volatility. Potentially large, regional cross-subsidies among banks were also found. Journal of Economic Literature Classification Number: G21.

Nonfinancial firms that use interest rate swaps are compared with nonusers for the years 1991, 1993, and 1995. Swap use grew from 6% of all firms in 1991 to 8% in 1995. Nonfinancial firms use fixed rate payer swaps more often than floating rate payer swaps. Firms that use swaps are significantly larger and have a higher debt to equity ratio relative to nonusers. Fixed rate payers receive a ratings' upgrade significantly more often than floating rate payers and experience a significantly higher percentage increase in net sales in the year of swap initiation relative to floating rate payers and the industry average. Floating rate payers have a significantly higher S&P bond rating relative to the industry average. The test results lend support to the information asymmetry theory of swap usage [Titman, S., 1992. Interest rate swaps and corporate financing choices, Journal of Finance 47, pp. 1503–1516] and lend some support to the asset substitution portion of the agency cost theory of swap usage [Wall, L.D., 1989. Interest rate swaps in an agency theoretic model with uncertain interest rates. Journal of Banking and Finance 13, pp. 261–270].

Banks in the US have been competing with investment banks through newly created “Section 20” subsidiaries. The evidence to date suggests that banks entry into securities activities via these subsidiaries has been pro-competitive. Recently, however, banks have been allowed to enter securities activities via acquisitions. This may not result in the same competitive effects as “new bank” entry.

Marion L. Chiattello [1] has provided additional empirical support for the suggestion that, because of the high degree of linear interdependence between many of the variables commonly used in banking regression studies, it may be necessary to interpret explanatory variables in a cross-sectional regression equation, not as representing individual influences, but as representing more general factors. Further, he has provided more empirical support for the suggestion that principal component analysis might be useful in helping to isolate and identify some of these general factors.

Robert J. Saunders, On the Interpretation of Models Explaining Cross Sectional Differences Among Commercial Banks, The Journal of Financial and Quantitative Analysis, Vol. 4, No. 1 (Mar., 1969), pp. 25-35

Some Problems in the Estimation of Personal Savings and Investment Get access C. T. Saunders C. T. Saunders London Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 22, Issue 2, 1954, Pages 109–128, https://doi.org/10.2307/2296286 Published: 01 January 1954