In finance, size matters: The "systematic scale economies" hypothesis

IMF Staff Papers

Volumn 51, Issue 1, 2004, Pages 19-46

  Bossone, Biagio ^a,b   Lee, Jong Kun ^c  

^a WORLD BANK   (United States)

^b Banca d'Italia ^*  (Italy)

^c the Bank of Korea   (South Korea)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 2642544157     PISSN: 10207635     EISSN: None     Source Type: Book Series    
DOI: None     Document Type: Article

References (49)

1. Allen, F., and D. Gale, 1999, Comparing Financial Systems (Cambridge, Massachusetts: MIT Press).
2. Allen, F., 2002, "Banking and Markets," presented at the IMF seminar on financial issues jointly held by the Monetary and Exchange Affairs and Research Departments, March 5, 2002.
3. Allen, F., and A. Santomero, 2001, "The Theory of Financial Intermediation," Journal of Banking and Finance, Vol. 25, No. 2, pp. 271-94.
4. Baltagi, B.H., and J.M. Griffin, 1988, "A General Index of Technical Change," Journal of Political Economy, Vol. 96, No. 1, pp. 20-41.
5. Beck, T., A. Demirgüç-Kunt, and R. Levine, 1999, "A New Database on Financial Development and Structure," Financial Sector Discussion Paper 2 (Washington: World Bank).
6. Belton, T.M., 1984, "Economies of Scale in Book-Entry Securities" (unpublished; Washington: Board of Governors of the Federal Reserve System).
7. Berger, A.N., and L.J. Mester, 1997, "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions," Journal of Banking and Finance, Vol. 20, pp. 895-947.
8. Berger, A.N., R.S. Demsetz, and P.E. Strahan, 1999, "The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future," Journal of Banking and Finance, Vol. 23, Nos. 2-4, pp. 135-94.
9. Berndt, E.R., Hall, B.E., and J.A. Hausman, 1974, "Estimation and Inference in Nonlinear Structural Models," Annals of Economic and Social Measurement, Vol. 3, pp. 653-65.
10. Biller, M.T., M.J. Flannery, and J.A. Garfinkel, 1995, "The Effect of Lender Identity on a Borrowing Firm's Equity Return," Journal of Finance, Vol. 50, pp. 699-718.
11. Bossone, B., 2001, "Do Banks Have a Future? A Study on Banking and Finance As We Move into the Third Millennium," Journal of Banking and Finance, Vol. 25, pp. 2239-76.
12. Bossone, B., P. Honohan, and M. Long, 2001, "Policy for Small Financial Systems," Financial Sector Discussion Paper 6 (Washington: World Bank).
13. Bossone, B., and J.K. Lee, 2002, "In Finance, Size Matters," IMF Working Paper 02/113 (Washington: International Monetary Fund).
14. Calem, P.S., 1994, "The Impact of Geographic Deregulation on Small Banks," Business Review, November/December (Philadelphia: Federal Reserve Bank of Philadelphia).
15. Chong, B.S., 1991, "The Effects of Interstate Banking on Commercial Banks' Risk and Profitability," Review of Economics and Statistics, Vol. 73, pp. 78-84.
16. Corrigan, E.G., 2000, "Are Banks Special? A Revisitation," The Region (Special Issue) (Minneapolis: Federal Reserve Bank of Minneapolis).
17. Cybo-Ottone, A., C. Di Noia, and M. Murgia, 1999, "The Consolidation of Securities Exchanges: Is There Any Lesson from the European Experience?" (unpublished; Rome).
18. Das, A., 1998, "Portfolio Risks and Scale Economies in Banking: "The Indian Case," International Journal of Development Banking, Vol. 16, No. 2, pp. 3-12.
19. Demirgüç-Kunt, A., and R. Levine, 1996, "Stock Market Development and Financial Intermediary Growth: Stylized Facts," World Bank Economic Review, Vol. 10, No. 2, pp. 291-321.
20. Demirgüç-Kunt, A., eds., 2001, Financial Structure and Economic Growth: A Cross-Country Comparison of Banks, Markets, and Development (Cambridge, Massachusetts: MIT Press).
21. Demsetz, R.S., and P.E. Strahan, 1997, "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit, and Banking, Vol. 29, pp. 300-13.
22. De Young, R., J.P. Hughes, and C.G. Moon, 1998, "Regulatory Covenant Enforcement and the Efficiency of Risk-Taking at U.S. Commercial Banks," Economics Working Paper 98-1 (Washington: Office of the Comptroller of the Currency).
23. Diamond, D., 1997, "Liquidity, Banks, and Markets," Journal of Political Economy, Vol. 105, No. 5, pp. 928-56.
24. Fukuyama, H., 1993, "Technical and Scale Efficiency of Japanese Commercial Banks: A Non-Parametric Approach," Applied Economics, Vol. 25, pp. 1101-12.
25. Gowrisankaran, G., and J. Stavins, 1999, "Network Externalities and Technology Adoption: Lessons from Electronic Payments," Working Paper 99-5 (Boston: Federal Reserve Bank).
26. Green, C.J., P. Maggioni, and V. Murinde, 2000, "Regulatory Lessons for Emerging Stock Markets from a Century of Evidence on Transactions Costs and Share Price Volatility in the London Stock Exchange," Journal of Banking and Finance, Vol. 24, No. 4, pp. 577-602.
27. Hancock, D., D.B. Humphrey, and J.A. Wilcox, 1999, "Cost Reductions in Electronic Payments: The Roles of Consolidation, Economies of Scale, and Technical Change," Journal of Banking and Finance, Vol. 23, pp. 391-421.
28. Hasan, I., and M. Malkamäki, 2001, "Are Expansions Cost Effective for Stock Exchanges? A Global Perspective," Journal of Banking and Finance, Vol. 25, pp. 2339-66.
29. Hughes, J.P., 1999, "Incorporating Risk into the Analysis of Production," American Economic Journal, Vol. 27, pp. 1-23.
30. Hughes, J.P., and L.J. Mester, 1998, "Bank Capitalization and Cost: Evidence of Scale Economies in Risk Management and Signaling," Review of Economics and Statistics, Vol. 80, No. 2, pp. 314-25.
31. Hughes, J.P., W. Lang, L.J. Mester, and C.G. Moon, 1999a, "Efficient Banking Under Interstate Branching," Review of Economics and Statistics, Vol. 81, pp. 250-60.
32. Hughes, J.P., 1999b, "The Dollars and Sense of Bank Consolidation," Journal of Banking and Finance, Vol. 23, pp. 291-324.
33. Hughes, J.P., 2001, "Are Scale Economies in Banking Elusive or Illusive? Evidence Obtained by Incorporating Capital Structure and Risk-Taking into Models of Bank Production," Journal of Banking and Finance, Vol. 25, No. 12, pp. 2169-208.
34. FitchIBCA, 2000, BvD Suite's BankScope Database, CD-ROM version and periodically updated website versions, available on the Internet at www.fitchibca.com/corporate/products/fitchProducts.cfm?detail=4 (New York: Bureau van Dijk Electronic Publishing Inc.).
35. IMF, 2001, International Financial Statistics, various issues (Washington).
36. Jacklin, C., 1987, "Demand Deposit, Trading Restrictions and Risk Sharing," in Contractual Arrangements for Intertemporal Trade, edited by E. Prescott and N. Wallace (Minneapolis: University of Minnesota Press).
37. Jacklin, C., and S. Bhattacharya, 1988, "Distinguishing Panic and Information Based Bank Runs: Welfare and Policy Implications," Journal of Political Economy, Vol. 96, No. 3, pp. 568-92.
38. James, C., 1987, "Some Evidence on the Uniqueness of Bank Loans," Journal of Financial Economics, Vol. 19, pp. 217-35.
39. Knack, S., and P. Keefer, 1995, "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Vol. 7 (November), pp. 207-27.
40. La Porta, R., F. Lopez-de-Silane, A. Shleifer, and R. Vishny, 1997, "Legal Determinants of External Finance," Journal of Finance, Vol. 52, No. 3, pp. 1131-50.
41. La Porta, R., 1998, "Law and Finance," Journal of Political Economy, Vol. 106, No. 6, pp. 1113-55.
42. Lummer, S.L., and J.J. McConnell, 1989, "Further Evidence on the Bank Lending Process and the Capital-Market Response to Bank Loan Agreement," Journal of Financial Economics, Vol. 79, pp. 113-34.
43. Malkamäki, M., 1999, "Are There Economies of Scale in Stock Exchange Activities?" Discussion Paper 4/99 (Helsinki: Bank of Finland).
44. McAllister, P.H., and D.A. McManus, 1993, "Resolving the Scale Efficiency Puzzle in Banking," Journal of Banking and Finance, Vol. 17, pp. 389-405.
45. Saloner, G., and A. Shepard, 1995, "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines," Rand Journal of Economics, Vol. 26 (Autumn), pp. 479-501.
46. Slovin, M.B., M.E. Sushka, and C.D. Hudson, 1988, "Corporate Commercial Paper, Note Issuance Facilities, and Shareholder Wealth," Journal of International Money and Finance, Vol. 7, pp. 289-302.
47. Walker, G., 1998, "Economies of Scale in Australian Banks 1978-1990," Australian Economic Papers, Vol. 37, No. 1, pp. 71-87.
48. World Bank, 2001a, Global Development Finance (Washington).
49. World Bank, 2001b, World Development Indicators (Washington).