Bank Performance around the Introduction of a Section 20 Subsidiary

摘要: As of 1987, commercial banks in the United States were allowed to establish Section 20 subsidiaries conduct investment-banking activities. A concern regulators was that these activities would result a decrease performance relative risk being undertaken. This paper examines around establishment subsidiary. We find undertaken by increased industryadjusted operating cash f low return on assets, due mainly revenues from noncommercial-banking Further, measures for sample do not change significantly. REGULATORY BARRIERS AND RESTRICTIONS governing operations U.S. financial system have often inhibited depository institution’s ability operate one area services industry and expand its product set into other areas. Specifically, 1933 Banking Act ~the Glass‐Steagall Act! sought impose rigid separation between banking investment banking. Particularly, noted concerns about possible increase riskiness profitability may arise when are affiliated organization. For most through 1963 period, generally appeared be willing abide letter spirit Act. Between however, challenged restrictions their underwrite securities such as municipal revenue bonds, paper, mortgage-backed securities. In cases, courts eventually permitted banks. With this de facto erosion legal interpretation, Federal Reserve Board April 1987 bank holding companies ~BHCs!—such First Union Corporation, parent * Cornett Ors Southern Illinois University at Carbondale Tehranian is Boston College. The authors wish thank Pierluigi Balduzzi, Alan Marcus, Rene Stulz, an anonymous referee comments. also grateful Elijah Brewer, III, Susan Yuska assistance obtaining Y-9 data Karen Rowland, who prepared manuscript.