On the Size Distribution of Financial Institutions

25 Pages Posted: 7 Oct 2011 Last revised: 15 May 2012

See all articles by John Goddard

John Goddard

University of Wales System - Bangor University

Hong Liu

University of Aberdeen

Donal G. McKillop

Queen's University Management School

John O. S. Wilson

University of St. Andrews

Date Written: May 14, 2012

Abstract

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

Goddard, John and Liu, Hong and McKillop, Donal G. and Wilson, John O. S., On the Size Distribution of Financial Institutions (May 14, 2012). Available at SSRN: https://ssrn.com/abstract=1940220 or http://dx.doi.org/10.2139/ssrn.1940220

John Goddard

University of Wales System - Bangor University ( email )

Bangor, Gwynedd, Wales LL57 2DG
United Kingdom

Hong Liu

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Donal G. McKillop

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland

John O. S. Wilson (Contact Author)

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

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