Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7356478 | Journal of Banking & Finance | 2018 | 38 Pages |
Abstract
Recent studies have presented evidence of scale economies for large banks, providing a rationale for some very large banks seen worldwide. In this study, we focus on the negative side of bank size which relates to monitoring costs. In particular, we show that the relationship between size and bank's market to book value of assets is contained by the cost of the manager to directly monitor the borrowers and by the (delegation) cost of the owner to monitor the bank manager. Using a sample of US bank holding companies from 2001 to 2015, we provide evidence that the relationship between size and bank's market to book value of assets is inverse U-shaped and that monitoring costs offset the benefits from economies of scale.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Panagiotis Avramidis, Christos Cabolis, Konstantinos Serfes,