Do We Need Big Banks? Evidence on Performance, Strategy and Market Discipline

Demirgüç-Kunt, Asli; Huizinga, Harry

dc.creator	Demirgüç-Kunt, Asli
dc.creator	Huizinga, Harry
dc.date	2012-03-19T18:00:41Z
dc.date	2012-03-19T18:00:41Z
dc.date	2011-02-01
dc.date.accessioned	2023-02-17T20:54:54Z
dc.date.available	2023-02-17T20:54:54Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110228093403
dc.identifier	http://hdl.handle.net/10986/3343
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244292
dc.description	For an international sample of banks, the authors construct measures of a bank's absolute size and its systemic size defined as size relative to the national economy. They examine how a bank's risk and return, its activity mix and funding strategy, and the extent to which it faces market discipline depend on both size measures. Although absolute size presents banks with a trade-off between risk and return, systemic size is an unmitigated bad, reducing return without a reduction in risk. Despite too-big-to-fail subsidies, the analysis finds that systemically large banks are subject to greater market discipline as evidenced by a higher sensitivity of their funding costs to risk proxies, suggesting that they are often too big to save. The finding that a bank's interest cost tends to rise with its systemic size can also in part explain why a bank's rate of return on assets tends to decline with systemic size. Overall, the results cast doubt on the need to have systemically large banks. Bank growth has not been in the interest of bank shareholders in small countries, and it is not clear whether those in larger countries have benefited. Although market discipline through increasing funding costs should keep systemic size in check, clearly it has not been effective in preventing the emergence of such banks in the first place. Inadequate corporate governance structures at banks seem to have enabled managers to pursue high-growth strategies at the expense of shareholders, providing support for greater government regulation.
dc.language	English
dc.relation	Policy Research Working Paper ; No. 5576
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	ACCOUNTING
dc.subject	ASSET RATIO
dc.subject	ASSETS RATIO
dc.subject	BALANCE SHEET
dc.subject	BANK ACTIVITY
dc.subject	BANK CAPITALIZATION
dc.subject	BANK EQUITY
dc.subject	BANK FAILURES
dc.subject	BANK HOLDING
dc.subject	BANK HOLDING COMPANIES
dc.subject	BANK HOLDING COMPANY
dc.subject	BANK INSOLVENCY
dc.subject	BANK LIABILITIES
dc.subject	BANK LIABILITY
dc.subject	BANK MARKET
dc.subject	BANK MERGERS
dc.subject	BANK OF ENGLAND
dc.subject	BANK PROFITABILITY
dc.subject	BANK RATE
dc.subject	BANK RISK
dc.subject	BANK SIZE
dc.subject	BANKING INDUSTRY
dc.subject	BANKRUPTCY
dc.subject	BANKS
dc.subject	BIG BANKS
dc.subject	BOND
dc.subject	BOND HOLDERS
dc.subject	BOND MARKETS
dc.subject	BONDS
dc.subject	BOOK VALUE
dc.subject	BUSINESS OPPORTUNITIES
dc.subject	BUSINESS STRATEGY
dc.subject	CAPITAL ASSETS
dc.subject	CAPITAL MARKETS
dc.subject	CAPITAL TO ASSET RATIO
dc.subject	CAPITALIZATION
dc.subject	CDS
dc.subject	COMMERCIAL BANKS
dc.subject	CONSOLIDATION
dc.subject	CONSUMER PROTECTION
dc.subject	COOPERATIVE BANK
dc.subject	COOPERATIVE BANKS
dc.subject	CORPORATE GOVERNANCE
dc.subject	CREDIT BANK
dc.subject	CREDIT BANKS
dc.subject	CREDIT INSTITUTION
dc.subject	CUSTOMER BASE
dc.subject	DEBENTURE
dc.subject	DEBENTURES
dc.subject	DEBT INVESTMENT
dc.subject	DEBT ISSUES
dc.subject	DEFAULT RISK
dc.subject	DEFICITS
dc.subject	DEPENDENT
dc.subject	DEPOSIT
dc.subject	DEPOSIT INSTITUTION
dc.subject	DEPOSIT INSURANCE
dc.subject	DEPOSIT INTEREST
dc.subject	DEPOSIT LIABILITIES
dc.subject	DEPOSITORS
dc.subject	DEPOSITS
dc.subject	DEVELOPMENT POLICY
dc.subject	DISTRESSED BANK
dc.subject	DIVERSIFICATION
dc.subject	DOMESTIC MARKETS
dc.subject	DUMMY VARIABLE
dc.subject	DUMMY VARIABLES
dc.subject	EARNING ASSETS
dc.subject	EARNINGS
dc.subject	EQUITY RATIO
dc.subject	EXPENDITURE
dc.subject	EXPLICIT DEPOSIT INSURANCE
dc.subject	FEE INCOME
dc.subject	FINANCIAL ASSISTANCE
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	FINANCIAL INTERMEDIATION
dc.subject	FINANCIAL SECTOR
dc.subject	FISCAL CAPACITIES
dc.subject	GDP
dc.subject	GDP DEFLATOR
dc.subject	GDP PER CAPITA
dc.subject	GOVERNANCE STRUCTURES
dc.subject	GOVERNMENT REGULATION
dc.subject	GOVERNMENT SUPPORT
dc.subject	GROWTH OPPORTUNITIES
dc.subject	GROWTH RATE
dc.subject	HIGH INTEREST RATE
dc.subject	HIGH INTEREST RATES
dc.subject	INCOME MEASURES
dc.subject	INCOME STATEMENT
dc.subject	INCREASING RETURNS
dc.subject	INCREASING RETURNS TO SCALE
dc.subject	INDIVIDUAL BANK
dc.subject	INDIVIDUAL BANKS
dc.subject	INFLATION
dc.subject	INFLATION RATE
dc.subject	INSOLVENT
dc.subject	INSURED DEPOSITS
dc.subject	INTEREST COST
dc.subject	INTEREST EXPENSE
dc.subject	INTEREST INCOME
dc.subject	INTEREST RATE
dc.subject	INTEREST RATES
dc.subject	INTERNATIONAL BANK
dc.subject	INTERNATIONAL ECONOMICS
dc.subject	INVESTMENT BANK
dc.subject	INVESTMENT BANKS
dc.subject	ISLAMIC BANK
dc.subject	ISLAMIC BANKS
dc.subject	LARGE BANK
dc.subject	LARGE BANK FAILURES
dc.subject	LARGE BANKS
dc.subject	LIABILITY
dc.subject	LIABILITY SIDE
dc.subject	LIQUID ASSETS
dc.subject	LIQUIDITY
dc.subject	LOAN
dc.subject	LOAN CUSTOMER
dc.subject	MACROECONOMIC CONTROL
dc.subject	MARKET DISCIPLINE
dc.subject	MERGER
dc.subject	MORTGAGE
dc.subject	MORTGAGE BANKS
dc.subject	NATIONAL BANKRUPTCY
dc.subject	NATIONAL ECONOMIES
dc.subject	NATIONAL ECONOMY
dc.subject	NUMBER OF BANKS
dc.subject	OPERATING COSTS
dc.subject	OPERATING INCOME
dc.subject	PERSONNEL EXPENSES
dc.subject	PORTFOLIO
dc.subject	PORTFOLIO ANALYSIS
dc.subject	POSITIVE COEFFICIENT
dc.subject	POSITIVE COEFFICIENTS
dc.subject	PROFITABILITY
dc.subject	PROFITABLE BUSINESS
dc.subject	PUBLIC FINANCE
dc.subject	PUBLIC FINANCES
dc.subject	PUT OPTION
dc.subject	RATE OF RETURN
dc.subject	RATES OF RETURN
dc.subject	REAL ESTATE
dc.subject	REAL GDP
dc.subject	RETURN
dc.subject	RETURN ON ASSETS
dc.subject	RETURNS
dc.subject	RETURNS TO SCALE
dc.subject	RISK FACTOR
dc.subject	RISK FACTORS
dc.subject	RISK OF BANK FAILURE
dc.subject	SAFETY NET
dc.subject	SAVINGS
dc.subject	SAVINGS BANKS
dc.subject	SECURITIES
dc.subject	SHARE OF INCOME
dc.subject	SHAREHOLDERS
dc.subject	SHORT TERM DEBT
dc.subject	SOLVENCY
dc.subject	SUBORDINATED DEBT
dc.subject	SYSTEMIC RISK
dc.subject	TAX
dc.subject	TAXATION
dc.subject	TERM CREDIT
dc.subject	TRADING
dc.subject	TRADING INCOME
dc.subject	TREASURY
dc.subject	WHOLESALE FUNDING
dc.title	Do We Need Big Banks? Evidence on Performance, Strategy and Market Discipline
dc.type	Publications & Research :: Policy Research Working Paper