Modeling economies of scale in banking

DeYoung, Robert

doi:10.1002/9781118541531.ch3

“…Banking systems have experienced a trend toward greater market concentration and a decline in the number of banks in recent decades. Driven by market power Laeven, 2004, 2005;Carbó-Valverde et al, 2009;Koetter et al, 2012), scale economy (Berger, 1995;DeYoung et al, 2009;DeYoung, 2012;Wheelock and Wilson, 2012) and too-big-to-fail motives (Mishkin, 2006;Kane, 2000;Stolz and Wedow, 2010;Laeven and Valencia, 2010;Carow et al 2011) banks have become larger. 1 However, these big, complex, and increasingly opaque banks exploited financial safety nets and took risks that endangered economies (Blinder, 2010;Feldman and Stern, 2010;Liikanen, 2012;IMF, 2013).…”

Section: Introductionmentioning

confidence: 99%

Small Banks and Local Economic Development*

Hakenes

¹

,

Hasan

²

,

Molyneux

³

et al. 2014

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This paper discusses the effects of small banks on economic growth. We first theoretically show that small banks operating at a regional level can spur local economic growth. As compared with big interregional banks, small regional banks are more effective in promoting local economic growth, especially in regions with lower initial endowments and severe credit rationing. We then test the model predictions using a sample of German banks and corresponding regional statistics. We find that small regional banks are more important funding providers in regions with low access to finance. The empirical results support the theoretical hypotheses.

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“…Banking systems have experienced a trend toward greater market concentration and a decline in the number of banks in recent decades. Driven by market power Laeven, 2004, 2005;Carbó-Valverde et al, 2009;Koetter et al, 2012), scale economy (Berger, 1995;DeYoung et al, 2009;DeYoung, 2012;Wheelock and Wilson, 2012) and too-big-to-fail motives (Mishkin, 2006;Kane, 2000;Stolz and Wedow, 2010;Laeven and Valencia, 2010;Carow et al 2011) banks have become larger. 1 However, these big, complex, and increasingly opaque banks exploited financial safety nets and took risks that endangered economies (Blinder, 2010;Feldman and Stern, 2010;Liikanen, 2012;IMF, 2013).…”

Section: Introductionmentioning

confidence: 99%

Small Banks and Local Economic Development

Hasan

¹

,

Molyneux

²

,

Xie

³

et al. 2014

View full text Add to dashboard Cite

This paper discusses the effects of small banks on economic growth. We first theoretically show that small banks operating at a regional level can spur local economic growth. As compared with big interregional banks, small regional banks are more effective in promoting local economic growth, especially in regions with lower initial endowments and severe credit rationing. We then test the model predictions using a sample of German banks and corresponding regional statistics. We find that small regional banks are more important funding providers in regions with low access to finance. The empirical results support the theoretical hypotheses.JEL Classification: G21, O16, R11. for their helpful comments. We sincerely thank the referee for his/her detailed comments. Errors and omissions remain the responsibility of the authors.

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“…As outlined above, we dene and compute several indicators for bank business model and investment choices that have been suggested in the previous literature (Brunnermeier et al, 2012;DeJonghe, 2010;DeYoung, 2013;Duchin and Sosyura, 2013). We test the dierence-in-dierence eect by using these indicators as dependent variables in our multivariate baseline model, including xed eects and additional controls.…”

Section: Bank Business Model Choices and Loan Originationmentioning

confidence: 99%

Wishful Thinking or Effective Threat? Tightening Bank Resolution Regimes and Bank Risk-Taking

Ignatowski

¹

,

Korte

²

2014

SSRN Journal

4

0

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Information on all of the papers published in the ECB Working Paper Series can be found on the ECB's website, http://www.ecb. europa.eu/pub/scientific/wps/date/html/index.en.html Lamfalussy FellowshipsThis paper has been produced under the ECB Lamfalussy Fellowship programme. This programme was launched in 2003 in the context of the ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe". It aims at stimulating high-quality research on the structure, integration and performance of the European financial system.The Fellowship programme is named after Baron Alexandre Lamfalussy, the first President of the European Monetary Institute. Mr Lamfalussy is one of the leading central bankers of his time and one of the main supporters of a single capital market within the European Union.Each year the programme sponsors five young scholars conducting a research project in the priority areas of the Network. The Lamfalussy Fellows and their projects are chosen by a selection committee composed of Eurosystem experts and academic scholars. Further information about the Network can be found at http://www.eufinancial-system.org and about the Fellowship programme under the menu point "fellowships".

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Modeling economies of scale in banking

Cited by 12 publications

References 21 publications

Small Banks and Local Economic Development*

Small Banks and Local Economic Development*

Small Banks and Local Economic Development

Wishful Thinking or Effective Threat? Tightening Bank Resolution Regimes and Bank Risk-Taking

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