The Impact of Multinationals on the Size of the Banking System
Kyklos, Vol. 66, 2013, pp. 378-397
21 Pages Posted: 10 Feb 2013 Last revised: 12 Jul 2013
There are 2 versions of this paper
What is the Appropriate Size of the Banking System?
Date Written: February 10, 2013
Abstract
After the global financial crisis, the size of the banking sector has become a hotly debated topic. To measure the size of the banking system a country’s banking assets divided by the country’s gross domestic product (GDP) is commonly applied as a general yardstick. This paper shows that this yardstick does not take into account differences in financial needs. In particular, countries differ with regard to the number and size of multinational enterprises. In a cross-country empirical study, we find a statistically significant relationship between the presence of large banks and the presence of multinationals, after controlling for the size of the country. That is why we develop an additional specific yardstick for firm specific financial needs.
Keywords: banks, too-big-to-save, multinationals
JEL Classification: G21, G28, D21
Suggested Citation: Suggested Citation