Are Bigger Banks Better? Firm-Level Evidence from Germany

Kilian Huber

Journal of Political Economy, 2021, vol. 129, issue 7, 2023 - 2066

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 results are based on 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 and the real economy.

Date: 2021
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Related works:
Working Paper: 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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