2.1.4. Size

There are a wide range of studies that associate bank dimension with profitability. The economies of scale are often cited as the reason why bank size may have a positive e ffect on bank profits (e.g., Diamond 1984), that is, the larger a bank, the more easily it can achieve economies of scale because, having a large dimension can increase its services with the same fixed costs, thus reducing expenses (Boyd and Runkle 1993). However, a too large bank may also incur diseconomies of scale as it will have an increase in costs, such as operational, bureaucratic and marketing expenses or inertia, thus negatively a ffecting the bank profitability (see, for example, Athanasoglou et al. 2008; Dietrich and Wanzenried 2011; Djalilov and Piesse 2016; Kosmidou 2008). According to García-Herrero et al. (2009), the increase in the size of the bank can also make bank managemen<sup>t</sup> di fficult due to the occurrence of aggressive competitive strategies.

Therefore, empirical research on the existence of economies of scale in banking does not come to a clear conclusion. In this context, some studies reveal a positive relationship between profitability and size (Ahamed 2017; Albertazzi and Gambacorta 2009; Altunba¸s et al. 2001; Dietrich and Wanzenried 2014; Kosmidou 20082; Petria et al. 2015), and others reveal a negative relationship (Berger et al. 1987; Pasiouras and Kosmidou 2007). Additionally, some authors like Athanasoglou et al. (2008); Bikker and Vervliet (2017) and Goddard et al. (2004), among others, found that bank size had no statistically significant influence on bank performance.

Since the literature is unclear regarding the sign of the relationship between bank size and profitability, the overall e ffect needs to be investigated empirically. Therefore, the following hypothesis is proposed:

### **Hypothesis 4.** *There is a relationship between the bank size and its performance.*
