Date of Graduation


Document Type


Degree Type



College of Business and Economics



Committee Chair

Scott Schuh

Committee Member

Joshua Hall

Committee Member

Arabinda Basistha

Committee Member

Laura Ullrich


The U.S. banking industry has experienced several technological and banking regulatory changes in the past two decades. This dissertation is composed of three papers that review and investigate how these banking and technological innovations have impacted depositors, bank provision of monetary assets, and bank performance. The order in which the papers are presented follows the order in which they were produced as the production of one paper helped spark ideas that led to the next.

Motivated by the fact that money has become more heterogeneous in terms of its returns, Chapter 1 focus on innovations in money markets by focusing on monetary assets that are used for payment of daily transaction in an economy, also called transaction balances. This chapter surveys and critically evaluates the historical regulatory, financial, and technological innovations that have occurred since the 1970s that have caused the definition of U.S. transaction balances to be a dynamic rather than a static process. The review concludes by analyzing the potential challenges this research field faces ahead, with the main topic being the social welfare consequences of the developments of the current payment system in the United States.

Given the different types of deposit accounts banks can offer highlighted in the first chapter, this raises the question: do banks operating in different regions offer different deposit accounts? Chapter 2 explores this by examining differences in the composition and behavior of West Virginia banks. The focus on WV is motivated by the relatively weak economic growth the state has experienced. Many factors potentially contribute to this fact, but little research has examined the role of financial services. This paper uses micro banking data to document how WV banks differ from their U.S. counterparts and assess whether differences can be explained 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 also have customers that favor lower-risk, lower-return deposits, and managers who rely heavily on lower-risk, lower-return real estate loans (mostly 1-4 unit residential). Other states have banks with considerable heterogeneity in real estate loan shares, but most of these financial outcomes are not explained well by observable bank and regional characteristics. Other factors are needed to explain financial heterogeneity of banks across states; unusually high risk aversion may explain the economically distinct banking strategies and low returns of WV banks.

Motivated by the findings from Chapter 2 of the presence of interesting differences in financial behavior of banks across U.S. states, this paper more formally quantifies them by exploring differences in one dimension (cost efficiency) and showing where they emerge geographically. Cost efficiency is explored due to its link to the ability of banks to survive and provide liquidity services to their clients (Assaf et al., 2019). This performance measurement is estimated at the bank-level using a parametric cost frontier methodology, which is then aggregated at the state-level to generate performance measures for U.S. state banking markets. Given the output quality homogeneity imposed by this methodology, this research focuses on U.S. community banks (CBs) only, which are local U.S. banks that specialize in relationship loans. When compared to the findings from two decades ago from Berger and Mester (1997), the bank-level results show a significant decrease in the average cost efficiency of U.S. banks relative to the best-practice bank in that respective period. At the state-level, a wide gap between top and poorly performing local banking markets is found. This is a result subsequent work will continue to investigate, given that it has the potential to partially explain differences in economic growth and labor market outcomes across U.S. states.