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

Ronald W. Anderson and Karin Jõeveer

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: G20 G21 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-09-13
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/119041/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119041

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().