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Are Bigger Banks More Profitable than Smaller Banks?

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  • Matthew C. Chang
  • Chien-Chung Nieh
  • Ya-Hui Peng

Abstract

In this study, we apply Panel Threshold Model (Hansen, 1999) to examine whether there is optimal asset scale for interest spread to affect banks' profits. The empirical results demonstrate the existence of three thresholds, which divide banks into four groups into four groups according to asset scale. When asset scales of banks are in the 3rd capital group, banks profit by the widening in loan-deposit interest spread. For the other three groups, however, the relationship between profit and loan-deposit spread is negative. Banks' return on equity (ROE) is positively correlated with net commission income, net invest income, net non-operating income, and net interest income.

Suggested Citation

  • Matthew C. Chang & Chien-Chung Nieh & Ya-Hui Peng, 2011. "Are Bigger Banks More Profitable than Smaller Banks?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(3), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:1:y:2011:i:3:f:1_3_4
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    Cited by:

    1. Li-Hua Lai & Li-Chin Hung & Chau-Jung Kuo, 2016. "Do Well-Financial Holding Company Organized Banks in Taiwan Take More Risk?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-30, December.

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