Bank size, market concentration, and bank earnings volatility in the US |
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Authors: | Jakob De Haan Tigran Poghosyan |
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Institution: | a University of Groningen, The Netherlands b CESifo, Munich, Germany c De Nederlandsche Bank, Amsterdam, The Netherlands d International Monetary Fund, 700 19th Street, N.W., Washington, DC 20431, United States |
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Abstract: | We examine whether bank earnings volatility depends on bank size and the degree of concentration in the banking sector. Using quarterly data for non-investment banks in the United States for the period 2004Q1-2009Q4 and controlling for the quality of management, leverage, and diversification, we find that bank size reduces return volatility. The negative impact of bank size on bank earnings volatility decreases (in absolute terms) with market concentration. We also find that larger banks located in concentrated markets have experienced higher volatility during the recent financial crisis. |
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Keywords: | Bank earnings volatility Bank size Market concentration Financial crisis |
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