EconStor >
Rutgers University >
Department of Economics, Rutgers University >
Working Papers, Department of Economics, Rutgers University >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/59493
  
Title:Who said large banks don't experience scale economies? Evidence from a risk-return-driven cost function PDF Logo
Authors:Hughes, Joseph J.
Mester, Loretta
Issue Date:2011
Series/Report no.:Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2011,27
Abstract:Earlier studies found little evidence of scale economies at large banks; later studies using data from the 1990s uncovered such evidence, providing a rationale for very large banks seen worldwide. Using more recent data, we estimate scale economies using two production models. The standard risk-neutral model finds little evidence of scale economies. The model using more general risk preferences and endogenous risk-taking finds large scale economies. We show that these economies are not driven by too-big-to-fail considerations. We evaluate the cost implications of breaking up the largest banks into banks of smaller size.
JEL:D21
D20
Document Type:Working Paper
Appears in Collections:Working Papers, Department of Economics, Rutgers University

Files in This Item:
File Description SizeFormat
665586280.pdf261.59 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/59493

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.