We investigate the link between firm size and risk-taking among financial institutions during the period of 1998-2008 and make three contributions. First, size is positively correlated with risk-taking measures even when controlling for other observable firm characteristics. This is consistent...

I construct a macroeconomic model with a heterogeneous banking sector and an interbank lending market. Banks differ in their ability to transform deposits from households into loans to firms. Bank size differences emerge endogenously in the model, and in steady state, the induced bank size...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...