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Archive » February 2021 » Too Big to Gain? How Size Matters for the Profitability of European Banks

Too Big to Gain? How Size Matters for the Profitability of European Banks

Paolo Boccardelli, Enzo Peruffo, Arina Tsirkuleva
February 2021 - n. 2
Keywords: Banche, dimensioni, redditività, credit management
Jel codes: G21, G28

This paper analyses the impact of banks’ size on their profitability, regarding as well the impact of two risk-related factors – the banks’ capacity for credit management and the riskiness of their business models (Bm). Analyzing data of 233 European banks from 26 countries for 2005 to 2019, we assess if the increase of bank size leads to increased returns for investors. We thus assess the different effects for banks with a less risky Bm (traditional retail) and banks with riskier Bm (diversified retail and investment). In this context, is efficient credit management a key enabling factor pushing forward the risk-return frontier, influencing the relation between size and profitability?

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