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The law of proportionate effect and OECD bank sectors

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  • Rudi Vander Vennet

Abstract

The paper investigates the growth dynamics of the bank sectors in the OECD area over the period 1985-1994 and examines whether the structural financial reforms of the late 1980s have affected their growth path. Based on a test of Gibrat's law of proportionate effect, it is found that the 1985-89 period was characterized by size convergence, implying that smaller bank sectors were expanding more rapidly. However, in the 1990-1994 period the pattern reversed to proportionate growth. The analysis of the determinants of bank market growth reveals that macroeconomic growth, operational bank efficiency, credit quality, and capitalization are the main drivers of bank industry growth.

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  • Rudi Vander Vennet, 2001. "The law of proportionate effect and OECD bank sectors," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 539-546.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:539-546
    DOI: 10.1080/00036840122263
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    References listed on IDEAS

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    Cited by:

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    3. Blandina Oliveira & Adelino Fortunato, 2017. "Firm growth and R&D: Evidence from the Portuguese manufacturing industry," Journal of Evolutionary Economics, Springer, vol. 27(3), pages 613-627, July.
    4. Ann-Marie Ward & Donal G. McKillop, 2005. "The Law of Proportionate Effect: The Growth of the UK Credit Union Movement at National and Regional Level," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(9-10), pages 1827-1859.
    5. Georgios Fotopoulos & Ioannis Giotopoulos, 2010. "Gibrat’s law and persistence of growth in Greek manufacturing," Small Business Economics, Springer, vol. 35(2), pages 191-202, September.
    6. Stefano Bianchini & Giulio Bottazzi & Federico Tamagni, 2017. "What does (not) characterize persistent corporate high-growth?," Small Business Economics, Springer, vol. 48(3), pages 633-656, March.
    7. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    8. Giovanni Dosi & Marco Grazzi & Daniele Moschella & Gary Pisano & Federico Tamagni, 2020. "Long-term firm growth: an empirical analysis of US manufacturers 1959–2015," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(2), pages 309-332.
    9. Sven-Olov Daunfeldt & Daniel Halvarsson, 2015. "Are high-growth firms one-hit wonders? Evidence from Sweden," Small Business Economics, Springer, vol. 44(2), pages 361-383, February.
    10. Maria de Mar Miralles-Quiros & José Luis Millares-Quiros & Julio Daza-Izquierdo, 2017. "Contraste de la ley de Gibrat en la banca comercialbrasile˜na," Contaduría y Administración, Accounting and Management, vol. 62(5), pages 27-28, Diciembre.
    11. Domínguez Jurado, José Miguel & Triguero-Ruiz, Francisco & Avila-Cano, Antonio, 2021. "Firm growth in the 21st century: Does the Andalusian economy comply with Gibrat’s Law?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 577(C).

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