On the Size Distribution of Financial Institutions
25 Pages Posted: 7 Oct 2011 Last revised: 15 May 2012
Date Written: May 14, 2012
This study examines the firm size distribution of US financial institutions. A truncated lognormal distribution describes the size distribution, measured using assets data, of a large population of small, community-based commercial banks. The size distribution of a smaller but increasingly dominant cohort of large banks, which operate a high-volume low-cost retail banking model, exhibits power-law behaviour. There is a progressive increase in skewness over time, and Zipf’s Law is rejected as a descriptor of the size distribution in the upper tail. By contrast, the asset size distribution of the population of credit unions conforms closely to the lognormal distribution.
Keywords: firm size distribution, Zipf’s Law, Gibrat’s Law, banks, credit unions
JEL Classification: G21, L10, L16
Suggested Citation: Suggested Citation