Multinational Finance Journal

Bank Profitability and Regulation in Emerging European Markets

Multinational Finance Journal, 2017, vol. 21, no. 3, pp. 177–210

Maria-Eleni K. Agoraki, Athens University of Economics and Business & Panteion University, Greece

Anastasios Tsamis, Panteion University, Greece

 

Abstract:

This paper investigates the effect of bank-specific, industry-specific and macroeconomic determinants, as well as the regulatory environment on the profitability of the emerging European banking sector over the period 2000-2016. Banks in countries with higher capital requirements, market discipline and more restrictions on banking activities performed better, while the better-performing banks had extensive foreign ownership. The empirical analysis reveals that performance is affected by bank-specific determinants like equity capital and bank size, while traditional activities lead to increased profitability. The specific measures of economic policy must be oriented towards specific aspects of the banking business. This will set new standards in performance and efficiency, urging bank management to address particular firm-specific issues, such as the composition of the balance sheet, the quality of the credit portfolio, as well as the range of financial products and services. Overall, the evidence shows that regulation, and balance sheets help in understanding bank profitability during the crisis.

 

Keywords:

Banking sector profitability; financial crisis; regulatory framework; emerging market

 

Citation (APA):

Agoraki, M.-E. K., & Tsamis, A. (2017). Bank profitability and regulation in emerging European markets. Multinational Finance Journal, 21(3), 177–210.

Citation (Harvard):