Who said large banks don ' t experience scale economies ? Evidence from a risk-return-driven cost function

  title={Who said large banks don ' t experience scale economies ? Evidence from a risk-return-driven cost function},
  author={Joseph P. Hughes},
Earlier studies found little evidence of scale economies at large banks; later studies using data from the 1990s uncovered such evidence, providing a rationale for very large banks seen worldwide. Using more recent data, we estimate scale economies using two production models. The standard risk-neutral model finds little evidence of scale economies. The model using more general risk preferences and endogenous risk-taking finds large scale economies. We show that these economies are not driven… CONTINUE READING
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