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The relationship between size, growth and profitability of commercial banks

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  • C. T. Shehzad
  • J. De Haan
  • B. Scholtens

Abstract

Using a dynamic panel model for more than 15 000 banks from 148 countries from 1988 to 2010, we investigate the interaction between size, growth and profitability of banks. For our total sample, we cannot reject the hypotheses that the variability of bank profitability and the level and variability of bank growth are independent of bank size. However, in high-income Organization for Economic Cooperation and Development (OECD) countries bigger banks grow slower but are more profitable than small banks. While bank growth is not persistent, bank profitability is persistent. Finally, we find that bank growth and bank profitability are independent of each other.

Suggested Citation

  • C. T. Shehzad & J. De Haan & B. Scholtens, 2013. "The relationship between size, growth and profitability of commercial banks," Applied Economics, Taylor & Francis Journals, vol. 45(13), pages 1751-1765, May.
  • Handle: RePEc:taf:applec:45:y:2013:i:13:p:1751-1765
    DOI: 10.1080/00036846.2011.637896
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    1. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
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    1. repec:lrk:eeaart:35_3_4 is not listed on IDEAS
    2. repec:eco:journ1:2018-01-3 is not listed on IDEAS
    3. Jacob Bikker & Tobias Vervliet, 2017. "Bank profitability and risk-taking under low interest rates," DNB Working Papers 560, Netherlands Central Bank, Research Department.
    4. repec:nax:conyad:v:62:y:2017:i:5:p:29-30 is not listed on IDEAS

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