Size, Growth, and Transnationality Among the World's Largest Banks

Abstract

This essay investigates the relationship between size and growth rate of large international banks and then relates these to the banks' degree of transnationality. We test two sets of three propositions each. The first three propositions are (PI) that the growth rate of each bank over some period is independent of its size; (P2) that the variability of growth rates is independent of the banks' size; and (P3) that the banks' growth rates in two consecutive periods are independent of each other. The second three propositions are (P4) that there is no association between size and transnationality; (P5) that transnationality and growth are independent; and (P6) that there is no relationship between transnationality and the variability of growth rates. The growth referred to is primarily that of assets as a measure of size. For the two propositions concerning the variability of growth rates we supplement this measure with one of the market value of the banks' equity. The results have implications for concentration in internaThis paper investigates six propositions relating to Gibrat's Law of Proportionate Growth. The growth referred to is that of book assets and total market value. The results have implications for concentration in international banking and for depositor safety and the social cost of insuring it, and provide evidence on economies of scale and on the transnational spread of the industry.