Big is Not Bad
Posted: 14 Feb 2019
Date Written: January 20, 2019
Our study is motivated by the continuing criticism of large banks and their role in the 2008 financial crisis. The need for the government to provide bailouts under the “Too Big to Fail” umbrella led to a negative perception associated with the term ‘big.’ This study provides an alternate perspective by examining the relation between stock market returns and asset size of bank holding companies around the crisis caused by the September 11, 2001 terrorist attacks on the World Trade Center in New York. We find evidence that larger banks experienced lower negative returns following the at-tack. This suggests that maybe “big is not bad.” The larger asset size appears to have acted as a cushion in the aftermath of the unexpected sudden shock.
Keywords: banks, asset size, returns, sudden shock, and financial crisis
JEL Classification: G01, G14, G21, G28, G30, G32
Suggested Citation: Suggested Citation