Document Type

Working Paper

Publication Date



Chambers College of Business and Economics

Document Number





Many factors contribute to weak economic growth in Appalachia, but little research has examined the role of banking heterogeneity and efficiency across states. This paper documents how West Virginia (WV) banks' financial behavior differs from other U.S. banks and shows these differences cannot be explained fully by the composition of banks in the state. Despite experiencing faster banking consolidation, West Virginia still has more and smaller banks that are less efficient and profitable. WV banks' customers and managers heavily favor liabilities (time deposits) and assets (real estate loans) with longer maturity and lower risk and returns. Although shares of time deposits and real estate loans are positively correlated across states in part due to lower interest risk, other factors are needed to fully explain banks' financial behavior across states and the connections to the real economy. Heterogeneity in the risk aversion of banks' customers and managers is one possible explanation.

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