THE WEALTH EFFECTS OF INTERSTATE BRANCHING

This paper examines the wealth effects of a decision by the Office of Thrift Supervision (OTS) to permit interstate branching for federally chartered savings and loan associations (SLAs). An event study of key OTS announcements in 1991 and 1992 is conducted based on samples of 38 federally chartered SLAs and 88 commercial banks. Large SLAs acid com mercial banks generally experienced significant positive wealth effect s but little or no reaction was found for smaller depository instituti ons. These findings provide early evidence that interstate branching p owers for depository institutions under the Riegle-Neal Interstate Ban king and Branching Efficiency Act of 1994 will tend to benefit large i nstitutions accelerating the trend toward consolidation, though withou t necessarily compromising the viability of smaller institutions.