Abstract
The objective of this study was to examine performance differences among black banks of different asset sizes, as compared with average nonminority banks of similar asset size from 1985 to 1991. The study found that large black banks with assets over $50 million outperformed smaller black banks with assets less than $50 million in terms of return on assets (ROA) and return on owners’ equity. Also, when compared with average nonminority banks with assets less than $300 million, the large black banks exhibited a statistically significant higher ROA than average nonminority banks in 1985 through 1987. However, the differences were found to be statistically insignificant in terms of return on owners’ equity (ROE) during the study period. Regression results show that provision for loan loss, high liquidity, and investment in treasury and government securities continue to impact negatively on small black banks’ performance but these factors have no statistically significant impact on large black banks’ performance.
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Notes
These studies include Timothy Bates and William Bradford, “An Analysis of the Portfolio Behavior of Black-Owned Commercial Banks,”Journal of Finance, 35 (June 1980): 753–768. Andrew Brimmer, “The Black Banks: Assessment of Performance and Prospects,”Journal of Finance 26 (May 1971): 29–50. Edward D. Irons, “Black Banking: Problems and Prospects,”Journal of Finance 26 (May 1971). John Cole, et al., “Black Banks: A Survey and Analysis of the Literature,”Review of Black Political Economy, 14 (Summer 1985): 29–50.
Brimer (1971), note 4, Irons (1971), note 4, Kwast, Myron, L., “New Minority Owned Commercial Banks: A Statistical Analysis,”Journal of Bank Research. Volume XII, No. 1 (Winter 1981), 37-45. Black, Harold, “An Analysis of Minority Banks,” Research Paper 77–76, Comptroller of the Currency, Washington D.C., 1977. Boorman, John T., “The Prospects of Minority Owned Commercial Banks: A Comparative Performance Analysis,”Journal of Bank Research, Volume IV (Winter 1974), 263–269.
Harold Black, “Black Financial Institutions and Urban Revitalization,”The Review of Black Political Economy, 10 (Fall 1979): 44–58. Robert Clair, “The Performance of Black-Owned Banks in Their Primary Market Areas,”Federal Reserve Bank of Dallas, Economic Review, (November 1988): 11–20. Bruce J. Summers and James F. Tucker, “Performance Characteristics of High-Earning Minority Banks,”Federal Reserve Bank of Richmond, Economic Review (November/December 1976): 3–12. Mona J. Gardner, “Black-Owned Commercial Banks: A New Look at their Performance and Management,”“The Review of Black Political Economy,” (Fall 1982): 91–100.
See Robert Clair (November 1988): 11–20.
For a discussion of size and bank profitability, refer to Allen N. Berger, William C. Hunter, and Stephen G. Timme, “The Efficiency of Financial Institutions: A Review and Preview of Research Past, Present and Future,”Journal of Banking and Finance, 17 (1993): 221–249. Thomas Gilligan, Michael Smirlock, and William Marshall, “Scale and Scope Economies in the Multi-Product Banking Firm,”Journal of Monetary Economics, 13 (1984): 393–405. T. Gilligan, and M. Smirlock, “An Empirical Study of Joint Production and Scale Economies in Commercial Banking,”Journal of Banking and Finance, 8 (1984): 67–77. Edward C. Gallick, “Bank Profitability and Bank Size,”Federal Reserve Bank of Kansas City, Monthly Review (January 1976): 11–16. David B. Humphrey, “Why Do Estimates of Bank Scale Economies Differ?“Federal Reserve Bank of Richmond, Economic Review (September/October 1990): 38–50.
Berger et al. (1993), p. 223.
Edward C. Gallick, “Bank Profitability and Bank Size,”Federal Reserve Bank of Kansas City, Monthly Review, (January 1976): 11–16.
Many bank analysts measure bank performance in terms of return on assets (ROA); see for example Berger et al., 1993, p. 338.
Mona J. Gardner, “Minority Owned Banks: A Managerial and Performance Analysis,”Journal of Bank Research, 15 (Spring 1984): 26–34; idem, “Black-owned Commercial Banks: A New Look at Their Performance and Management,”Review of Black Political Economy (Fall 1982): pp. 91–100.
Gardner, 1982.
Aruma Srinivasan, “Are there Cost Savings from Bank Mergers?”Economic Review, Federal Reserve Bank of Atlanta (March/April 1992): 17–28.
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Ziorklui, S.Q. The performance of black-owned commercial banks: A comparative analysis. The Review of Black Political Economy 23, 5–23 (1994). https://doi.org/10.1007/BF02692732
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DOI: https://doi.org/10.1007/BF02692732