The size and growth of banks: evidence from four European countries

This paper investigates the relationship between size and growth for a samp le of banks from France, Germany, Italy and the UK over the period 1990 to 1996. Using several measures of bank size (total assets, equity and value o f off balance sheet business), we test for size effects on growth, using mo dels which incorporate the influences of previous growth, bank type and cou ntry of origin. The results of the analysis suggest that for Italy, small b anks tend to grow faster than larger banks. No relationship is found betwee n bank size and growth for France, Germany and the UK. This suggests a proc ess of increasing concentration in these banking systems, even in the absen ce of bank specific strategic advantages. Small banks tend to have more var iable growth rates than their larger counterparts. This suggests that large banks may enjoy advantages associated with diversified operations, which m ake them less susceptible to periods of extremely high or low growth.