Measuring the Performance of Banks: Theory, Practice, Evidence, and Some Policy Implications

摘要: The unique capital structure of commercial banking – funding production with demandable debt that participates in the economy’s payments system affects various aspects banking. It shapes banks’ comparative advantage providing financial products and services to informationally opaque customers, their ability diversify credit liquidity risk, how they are regulated, including need obtain a charter operate explicit implicit federal guarantees bank liabilities reduce probability runs. These affect bank’s choice risk vs. expected return, which, turn, performance. Banks have an incentive protect valuable from episodes distress also increase exploit cost-of-funds subsidy mispriced deposit insurance. contrasting incentives tied size. Measuring performance banks its relationship size requires untangling cost profit decisions about versus expected-return because both functions endogenous risk-taking.This chapter gives overview two general empirical approaches measuring discusses some applications these found literature. One application explains better diversification available at larger scale operations generates economies obscured by higher levels risk-taking. Studies ignore risk-taking find little evidence largest while those control for this large important implications regulation.