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Do financial crises cleanse the banking industry? Evidence from U.S. commercial‐​bank exits

Do financial crises cleanse the banking industry? Evidence from U.S. commercial‐​bank exits
Do financial crises cleanse the banking industry? Evidence from U.S. commercial‐​bank exits
Numerous studies highlight the large costs of financial crises in terms of financial instability and the decline of economic growth. While these costs are indisputable, more controversial is the possibility that some benefits might arise from these crises, such as the exit of less-productive firms. The proponents of these benefits see crises as a selection process that accelerates the removal of the least-productive firms, with an overall positive effect at the industry level. This argument is formalized in the cleansing view of real and financial shocks dating back to Joseph Schumpeter and his concept of creative destruction.
182
Cato Institute
Spokeviciute, Laima
11a665b7-7266-455d-99c3-e928e9f8fb79
Spokeviciute, Laima
11a665b7-7266-455d-99c3-e928e9f8fb79

Spokeviciute, Laima (2019) Do financial crises cleanse the banking industry? Evidence from U.S. commercial‐​bank exits (Research Briefs in Economic Policy, 182) Washington D.C.. Cato Institute 2pp.

Record type: Monograph (Project Report)

Abstract

Numerous studies highlight the large costs of financial crises in terms of financial instability and the decline of economic growth. While these costs are indisputable, more controversial is the possibility that some benefits might arise from these crises, such as the exit of less-productive firms. The proponents of these benefits see crises as a selection process that accelerates the removal of the least-productive firms, with an overall positive effect at the industry level. This argument is formalized in the cleansing view of real and financial shocks dating back to Joseph Schumpeter and his concept of creative destruction.

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Published date: 25 September 2019

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Local EPrints ID: 436169
URI: http://eprints.soton.ac.uk/id/eprint/436169
PURE UUID: 7c0f49e1-8845-4915-9962-b4ae77fb5d2c
ORCID for Laima Spokeviciute: ORCID iD orcid.org/0000-0002-6563-5790

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Date deposited: 02 Dec 2019 17:30
Last modified: 12 Dec 2021 07:34

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Author: Laima Spokeviciute ORCID iD

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