Hansen’s (1999) panel threshold regression model is applied in this study to investigate the correlation between bank size and bank earnings volatility in 14 Chinese banks. These data were adopted after the Lehman Brothers bankruptcy was announced in 2009Q4. The data used in this study cover the period from 2009Q1 to 2013Q1. The dependent variable is bank earnings volatility, whereas bank size is the independent and threshold variable. Empirical results show the significance of a single threshold on bank size and return on asset (ROA) earnings volatility. Bank size and ROA earnings volatility are positively correlated when the bank size is less than or equal to 733,211,391 CNY. However, such bank size does not reach significant levels. By contrast, bank size slope and ROA earnings volatility is − significant at levels when bank size is more than 733,211,391 CNY. Specifically, a larger bank size means less bank earnings volatility. Regarding return on equity (ROE), empirical results show an insignificant relationship between bank size and bank earnings volatility.
