Are Bigger Banks Better? Firm-Level Evidence from Germany

Kilian Huber

No 15769, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in postwar Germany. I show that firms did not grow faster after their relationship banks became bigger. In fact, opaque borrowers grew more slowly. The enlarged banks did not increase profits or efficiency, but worked with riskier borrowers. Bank managers benefited through higher salaries and media attention. The paper presents newly digitized microdata on German firms and their banks. Overall, the findings reveal that bigger banks do not always raise real growth and can actually harm some borrowers.

Keywords: Large firms; Economies of scale; Too big to fail; Bank size; Bank regulation; Financial regulation; Firm employment; Manager compensation; German history (search for similar items in EconPapers)
JEL-codes: E24 E44 G21 G28 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Are Bigger Banks Better? Firm-Level Evidence from Germany (2021)
Working Paper: Are Bigger Banks Better? Firm-Level Evidence from Germany (2021)
Working Paper: Are Bigger Banks Better? Firm-Level Evidence from Germany (2020)
Working Paper: Are bigger banks better? Firm-level evidence from Germany (2020)
Working Paper: Are Bigger Banks Better? Firm-Level Evidence from Germany (2020)
Working Paper: Are bigger banks better?: firm level evidence from Germany (2020)
Working Paper: Are bigger banks better? Firm-level evidence from Germany (2020)
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