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Growth and Concentration of Swiss Banks, 1945-1965

Authors
Disciplines
  • Economics
  • Political Science

Abstract

Growth and Concentration of Swiss Banks, 1945-1965 By Ernst Baltensperger1 The size structure of an industry is of considerable economic and political interest. This is particularly true in the case of the banking industry. It is the purpose of this paper to provide some information about the behavior of Swiss banks during the pe- riod 1945 —1965. Intertemporal changes of firm sizes and concentration are studied. In the first section of the paper, the relationship between the size of a bank and its rate of growth is examined. It is shown that during the period of observation banks of all sizes have grown, on the average, at the same rate. The variability of growth rates around the mean rate, however, was smaller in large size classes than in low size classes. Different explanations for this are offered. In the following section, the growth of banks is related to the concentration of banking firms and changes of con- centration over time. While the degree of concentration among the banks surviving between 1945 and 1965 did increase, this increase was offset by a distinctively smal- ler degree of concentration among the new firms entering the industry during the period, so that the overall concentration stayed more or less the same. Section three deals with exits, mergers and entries of new firms. In the last section, finally, the relationship between growth rates and size of firm for an industry subject to econo- mies of scale is considered. There is a considerable amount of literature suggesting that banking operations are subject to economies of scale (see footnote 15 for ref- erences). It is frequently argued that in a decreasing cost industry large firms should grow faster, on the average, than small firms. Here it will be shown, however, that independence between (mean) growth rate and firm size, as we found it in section one, is fully consistent with the hypothesis that there are economies of scale in banking. Growth of firms does depend on changes of costs and demand ov

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