Bankers and bank investors: Reconsidering the economies of scale in banking

Ronald Anderson and ,
Authors registered in the RePEc Author Service: Karin Jõeveer

No 9146, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study economies of scale in banking by viewing banks as combinations of financial and human capital that create rents which accrue to investors and bankers. Applying this approach to annual data of US bank holding companies since 1990, we find much stronger evidence of economies of scale in returns to bankers as compared to returns to investors. The scale economies appear to be particularly strong in the top size decile of banks measured by total assets. We find that rents accruing to bankers are particularly strong in banks with a relatively large share of non-interest income and that for the largest banks a reduction of net interest margin is associated with an increase in bankers' rents. We find incorporating observable proxies for funding efficiency and presence in wholesale banking activities greatly reduces the pure size effect.

Keywords: Agency; Banking; Compensation policy; Scale economies (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-ban and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Bankers and bank investors: Reconsidering the economies of scale in banking (2012)
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