Geographic Diversification, Bank Holding Company Value, and Risk

We assess the association between geographic diversification and bank holding company (BHC) value and risk, controlling for the distance between the headquarters and branches. The distance-adjusted deposit dispersion index used as a measure of geographic diversification accounts for the number of locations where a BHC operates, the level of activity in each location, and the distance between a BHC and its branches. We find that geographic diversification is associated with BHC value enhancement and risk reduction, increased distance between a BHC and its branches is associated with firm value reduction and risk increase, and geographic diversification across more remote areas is associated with greater value enhancement but smaller risk reduction