scholarly journals Abnormal Loan Growth and Bank Profitability: Some Evidence from the Recent Crisis

2019 ◽  
Vol 14 (7) ◽  
pp. 36
Author(s):  
Simone Rossi ◽  
Mariarosa Borroni ◽  
Mariacristina Piva ◽  
Andrea Lippi
Keyword(s):  
Bank Profitability ◽  
Credit Growth ◽  
Crisis Period ◽  
Managerial Myopia ◽  
Lending Policy ◽  
European Banks ◽  
Loan Growth ◽  
Credit Standards ◽  
The Relationship

During healthy economic/financial times, credit growth often happens without proper provisioning. This is due to a managerial myopia that underestimates the risks underlying an expansive lending policy, leading to lower profitability in following years. However, given the countercyclicality of credit standards, this effect shouldn’t occur during harsh times. In this paper, we analyse the relationship between abnormal credit growth and bank profitability during a crisis period. In particular, we test the hypothesis that during a crisis, abnormal credit growth improves bank profitability, given the need for higher, or at least stable, credit standards. We find support for this assumption using a sample of 101 large European banks observed during the recent crisis period. Results are robust to different robustness checks.

scholarly journals Stakeholder Engagement: Some Empirical Evidence from a Sample of European Banks

2015 ◽  
Vol 2 (2) ◽  
pp. 11 ◽  
Author(s):  
Giuliana Birindelli ◽  
Mariantonietta Intonti ◽  
Massimo Bilancia ◽  
Maura La Torre ◽  
Martina Malorni
Keyword(s):  
Empirical Evidence ◽  
Stakeholder Engagement ◽  
Banking Sector ◽  
Bank Performance ◽  
Bank Profitability ◽  
Research Areas ◽  
Recent Approach ◽  
European Banks ◽  
The Relationship ◽  
Management Issues

<p>Our paper aims to analyse the practice of Stakeholder Engagement (SE) in the banking sector and to investigate if SE affects European bank profitability. To identify how banks engage stakeholders we developed a model for calculating an original "SE rating", that comes from four research areas: "Disclosure", "Stakeholders engaged", "Instruments of engagement", and "Management of the SE process". We then provided empirical evidence about the relationship between bank performance and SE rating through a panel analysis. Our evidence shows that commitment to SE should be increased significantly by focusing on organisation and management issues, and - to a lesser extent - on disclosure towards the market. Finally, our econometric study shows that relationship between SE rating and bank performance is not statistically significant, most likely due to the recent approach of banks to SE practice.</p>

scholarly journals The fat years: the structure and profitability of the US banking sector in the pre-crisis period

2009 ◽  
Vol 33 (4) ◽  
pp. 609-632 ◽  
Author(s):  
Fiona Tregenna
Keyword(s):  
Banking Sector ◽  
Policy Implications ◽  
Current Crisis ◽  
Bank Profitability ◽  
Crisis Period ◽  
Efficient Performance ◽  
The Us ◽  
The Usa ◽  
The Relationship ◽  
Robust Evidence

Abstract Bank profitability in the USA was extremely high in the pre-crisis period, yet this did not prevent the current crisis. It has become clear that these profits were on shaky grounds and also that bank profits were not used to buttress banks’ capital bases. This paper analyses the effects of structure on profitability from 1994 to 2005. Bank-level panel data are used to test the effects of concentration, market power, bank size and operational efficiency on profitability. Efficiency is not found to be a strong determinant of profitability, suggesting that banks’ high profits during this period were not ‘earned’ through efficient performance. Robust evidence is found that concentration increases bank profitability. This holds even when the largest banks are excluded from the sample, suggesting that the relationship between concentration and profitability acts in a generalised structural way and that the higher profits arising from concentration are at the expense of the rest of the economy. The analysis points to various policy implications relevant to the current crisis, in particular in terms of the legitimacy of expectations of the restoration of pre-crisis profit rates and the need for much stronger regulation of the banking sector, especially in terms of the structure of the sector, pricing behaviour and use of profits.

scholarly journals Market Concentration And Industry Profitability: The Case Of Greek Banking (1997-2004)

2011 ◽  
Vol 5 (10) ◽  
Author(s):  
Paraschos Maniatis
Keyword(s):  
Interest Rates ◽  
Financial Institutions ◽  
Empirical Investigation ◽  
Credit Rationing ◽  
Market Concentration ◽  
Weak Effect ◽  
Bank Profitability ◽  
And Performance ◽  
Credit Standards ◽  
The Relationship

An empirical investigation of the relationship between market concentration and performance in the Greek banking, this paper finds that market concentration has a weak effect on bank profitability. This finding could be attributed to the long tradition of the Greek governments to keep the financial institutions under immediate either in the form of state-owned institutions or indirectly through a complex and rigid regulations concerning interest rates, credit standards and credit rationing.

scholarly journals BANK PROFITABILITY AND MACROECONOMY: EVIDENCE FROM LITHUANIA

2017 ◽  
Vol 24 (2) ◽  
pp. 383-405 ◽  
Author(s):  
Laurynas NARUŠEVIČIUS
Keyword(s):  
Banking Sector ◽  
Short Term ◽  
Empirical Examination ◽  
Bank Profitability ◽  
Pooled Mean Group ◽  
Real Gdp ◽  
Income Statement ◽  
Main Determinants ◽  
The Relationship

The purpose of this paper is to investigate the relationship between profitability of the Lithuanian banking sector and its internal and external determinants. We use the panel error correc­tion model to assess long-term and short-term determinants of items from bank income statements (net interest income, net fee and commission income and operating expenses). The results of the pooled mean group estimator show that bank size and real GDP are the main determinants in the long-term. Meanwhile, empirical examination suggests various variables as short-term determinants of income statement items. The pooled mean group estimation technique and the analysis of sepa­rate income statement items enable us to have a better insight into the Lithuanian banking sector and determinants of its revenue and expenses.

The impact of bank liquidity risk on risk-taking and bank lending: evidence from European bank

2021 ◽  
Vol 6 (2) ◽  
pp. 82-97
Author(s):  
Hongyan Liang ◽  
Zilong Liu
Keyword(s):  
Growth Rate ◽  
Risk Taking ◽  
Fixed Effects ◽  
Liquidity Risk ◽  
Bank Lending ◽  
Basel Iii ◽  
European Banks ◽  
Risk Taking Behavior ◽  
Loan Growth ◽  
The Impact

Objective – This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank’s risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors’ best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank’s risking-taking behavior while not necessarily impact their future loan growth. Type of Paper: Empirical JEL Classification: G21, G01, G18. Keywords: Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III

scholarly journals Value relevance of accounting data and financial crisis in Europe: an empirical analysis

2012 ◽  
Vol 2 (2) ◽  
pp. 201 ◽  
Author(s):  
Alain Devalle
Keyword(s):  
Financial Crisis ◽  
Positive Impact ◽  
Value Relevance ◽  
Net Income ◽  
Accounting Data ◽  
Book Value ◽  
Crisis Period ◽  
Comprehensive Income ◽  
The Impact ◽  
The Relationship

This paper aims at verifying the relationship between book value and  market value for a four years period (2006-2009) in Europe, under IFRS. In particular, I used value relevance approach to measure whether net income or comprehensive income are more useful to understand the relationship between market data and financial data. Moreover, the paper analyzes the impact of financial crisis on the value relevance of accounting data. The examination period runs from a pre-crisis period (2006-2007) to an in-crisis period (2008-2009). Results shows that comprehensive income is more value relevant than net income. Furthermore, the financial crisis has a positive impact on value relevance.  

scholarly journals Bank wholesale funding and credit procyclicality: Evidence from Korea

2013 ◽  
Vol 60 (5) ◽  
pp. 615-631 ◽  
Author(s):  
Sangjun Jeong ◽  
Hueechae Jung
Keyword(s):  
Business Cycle ◽  
Emerging Economies ◽  
Commercial Banks ◽  
Marked Effect ◽  
The Other ◽  
Financial Fragility ◽  
Credit Growth ◽  
The Business Cycle ◽  
The Relationship ◽  
Higher Sensitivity

Credit procyclicality has recently been the focus of considerable attention, but what fuels the often excessive credit growth is rarely questioned. We investigate the relationship between the composition of banks? liabilities and their credit procyclicality. After examining the macroeconomic context where banks rely increasingly on wholesale funding (WSF), we estimate the effect of WSF on the banks? credit growth using quarterly panel data for the commercial banks of Korea from 2000 to 2011. We find that a higher sensitivity of banks? WSF to the business cycle leads to an excessive response of credit growth to the business cycle, even with a low share of WSF on bank liabilities. On the other hand, we find that overseas WSF has a more marked effect on credit procyclicality, which may additionally exacerbate the financial fragility of export-led emerging economies.

scholarly journals The Contribution of ESG Information to the Financial Stability of European Banks

2021 ◽  
Vol 66 (3) ◽  
pp. 429-450
Author(s):  
Balázs Tóth ◽  
Edit Lippai-Makra ◽  
Dániel Szládek ◽  
Gábor Dávid Kiss
Keyword(s):  
Financial Stability ◽  
Stock Exchange ◽  
Trade Association ◽  
The European Union ◽  
Regulatory Capital ◽  
European Free Trade Association ◽  
European Banks ◽  
Lending Institutions ◽  
The Relationship ◽  
Positive Effect

Nowadays more and more economic actors publish information regarding sustainability, through economic (E), social (S), and governance (G) performance. In the case of banks, ESG performance is important as they affect most of the industries through their investments and loans. In this research our aim is to investigate the relationship between financial stability and ESG performance. We applied panel regressive methods during the analysis. The sample consisted of stock exchange listed lending institutions (243 banks) from the European Union (EU) and the European Free Trade Association (EFTA). Our results show that ESG performance reduced the ratio of non-performing loans significantly. Furthermore, the positive effect of regulatory capital has been confirmed. Consequently, we can assert that the economic, social, and governance performance have beneficial impacts on financial stability. Therefore, the consideration of these pieces of information should be important for the investors and the regulators as well.

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