Size and earnings volatility of US bank holding companies |
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| Authors: | Jakob de Haan Tigran Poghosyan |
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| Affiliation: | 1. De Nederlandsche Bank, PO Box 98, 1000 AB, Amsterdam, The Netherlands;2. Faculty of Economics and Business, University of Groningen, PO BOX 800, 9700 AV, Groningen, The Netherlands;3. CESifo, Munich, Germany;4. 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. Using quarterly data for bank holding companies in the United States for the period 1995Q1–2010Q3 and controlling for the quality of management, leverage, and diversification, we find that bank size reduces return volatility. However, the effect is non-linear: when bank size exceeds a certain threshold (about US$5 billion) size is positively related to earnings volatility. The recent financial crisis decreased the threshold beyond which the impact of size on volatility turns positive. |
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| Keywords: | G21 G32 L25 |
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