Are European banks too big? evidence on economies of scale

Elena Beccalli, Mario Anolli and Giuliana Borello

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

Abstract: In light of the policy debate on too-big-to-fail we investigate evidence of economies of scale for 103 European listed banks over 2000 to 2011. Using the Stochastic Frontier Approach, the results show that economies of scale are widespread across different size classes of banks and are especially large for the biggest banks. At the country level, banks operating in the smallest financial systems and the countries most affected by the financial crises realize the lowest scale economies (including diseconomies) due to the reduction in production capacity. As for the determinants of scale economies, these mainly emanate from banks oriented towards investment banking, with higher liquidity, lower Tier 1 capital, those that contributed less to systemic risk during the crises, and those with too-big-to-fail status.

Keywords: bank; economies of scale; regulation; too-big-to-fail; EU (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-ban and nep-eff
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Citations: View citations in EconPapers (45)

Published in Journal of Banking and Finance, September, 2015, 58, pp. 232-246. ISSN: 0378-4266

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Journal Article: Are European banks too big? Evidence on economies of scale (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:62936

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