Size, charter value and risk in banking: an international perspective
This paper documents the relationships between bank size and measures of charter value and insolvency risk in a sample of publicly traded banks in 21 industrialized countries for the 1988-1998 period. With the exception of small U.S. bank holding companies, charter values decrease in size and insolvency risk increases in size for most banks in the countries considered. Size-related diversification benefits and/or economies of scale in intermediation are either absent or, if they exist, are more than offset by banks' higher risk taking. Furthermore, banks operating in countries with more ...
Location influences community banks' challenges
Too big to fail: the pros and cons of breaking up big banks
Many people want to put size limits on ?too big to fail? banks, given their risks to the broader economy. Such limits, however, could raise the cost of providing banking services by preventing banks from exploiting economies of scale.
Diversification, size, and risk at bank holding companies
This paper shows that large BHCs are better diversified than small BHCs based on market measures of diversification. We find, however, that better diversification does not translate into reductions in overall risk. The risk reducing potential of diversification at large BHCs is offset by their lower capital ratios, larger C&I loan portfolios, and greater use of derivatives. Our results suggest that asset growth should enhance diversification but that the effects on risk will depend on the extent to which growth is accompanied by changes in portfolio attributes. Using data from 1980 to 1993, ...
Determinants of small bank acquisition premiums