Banking Deregulation, Punctuated Equilibrium & Early-Mover Advantage

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Proponents of the punctuated equilibrium and first-mover frameworks suggest that banks reacting strongly to changes brought about by deregulation will succeed. Alternatively, population ecologists argue that firms are unable to undertake significant change. We support the punctuated equilibrium view - banks that aggressively undertook merger and acquisition (M&A) activity once deregulation was enacted increased their probability of survival. However, we find evidence that 'fast-followers' perform better than 'first-movers.' Banks completing their first acquisition in the second year after deregulation was enacted had better chances of survival than banks completing their first acquisition in the first year, or the third through fifth years.

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