Article: Capital Requirements and Financial Markets in California During the Early 20th Century Journal: Journal of Business and Management (JBM) 2016 Vol.22 No.2 pp.83 - 93 Abstract: Lynne Doti emphasizes the use of historical banking data to study banking structure and performance and economic development. In her book, Banking in an Unregulated Environment: California, 1878-1905, the role of national capital requirements as a barrier to entry is revisited. Previous studies focusing on national banks find that rural bankers operate as a price discriminating monopolist. However, by 1900 over half of the banks in the United States were state banks. Doti includes state banks in the analysis and finds that they could have met the high national capital requirements and that there is not a significant difference in interest rates between rural and urban areas. Following Doti's example, bank and town level data is gathered for California to explore the impact of capital requirements on banking markets one year after state regulators began implementing capital requirements. The data suggest capital requirements do not alter the composition of capital in banking markets during this time period. The majority of state banks still hold capital levels similar to national banks even when they are subject to lower capital requirements. Inderscience Publishers - linking academia, business and industry through research

Title: Capital Requirements and Financial Markets in California During the Early 20th Century

Authors: Michael Gou

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: Lynne Doti emphasizes the use of historical banking data to study banking structure and performance and economic development. In her book, Banking in an Unregulated Environment: California, 1878-1905, the role of national capital requirements as a barrier to entry is revisited. Previous studies focusing on national banks find that rural bankers operate as a price discriminating monopolist. However, by 1900 over half of the banks in the United States were state banks. Doti includes state banks in the analysis and finds that they could have met the high national capital requirements and that there is not a significant difference in interest rates between rural and urban areas. Following Doti's example, bank and town level data is gathered for California to explore the impact of capital requirements on banking markets one year after state regulators began implementing capital requirements. The data suggest capital requirements do not alter the composition of capital in banking markets during this time period. The majority of state banks still hold capital levels similar to national banks even when they are subject to lower capital requirements.

Keywords: Capital requirements; financial markets; 20th century; economic development.

DOI: 10.1504/JBM.2016.141249

Journal of Business and Management, 2016 Vol.22 No.2, pp.83 - 93

Published online: 05 Sep 2024 *

Title: Capital Requirements and Financial Markets in California During the Early 20th Century

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