Download or read book Geographic Diversification and Banks@0394@03C3 Funding Costs written by Ross Levine and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We assess the impact of the geographic expansion of bank assets on the cost of banks' interest-bearing liabilities. Existing research suggests that expansion can both intensify agency problems that increase funding costs and facilitate risk diversification that decreases funding costs. Using a newly developed identification strategy, we discover that the geographic expansion of banks across U.S. states lowered their funding costs, especially when banks are headquartered in states with lower macroeconomic covariance with the overall U.S. economy. The results are consistent with the view that geographic expansion offers large risk diversification opportunities that reduce funding costs