BANK PERFORMANCE DURING FINANCIAL CRISIS 2008: Impact of bank characteristics
Virkkunen, Piia (2012)
2012
Kuvaus
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Tiivistelmä
The purpose of this thesis is to investigate bank performance during recent financial crisis. The aim is to find reasons why recent financial crisis affected banks differentially. Possible congruent bank characteristics between European Union and United States are tried to identify.
The data consist of 110 publicly traded banks in United States and European Union areas whose total assets were above 10 billion USD in the end of 2006 and who have Tier 1 ratio available for 2006. Period of financial crisis is identi-fied from October 2007 to March 2009. Returns for all of the banks in the sample are calculated for the crisis period. First mean comparison between top and bot-tom quartiles for European Union, United States and combined portfolios are done. Multiple regression analysis is used in order to identify bank characteristics explaining the performance during crisis.
The results are somewhat mixed with providing only some evidence for bank characteristics explaining the crisis performance. Bank characteristics explaining the performance are partly similar and partly differ notably between banks in European Union and United States. Best performing banks in both regions are smaller size banks with higher deposits and equity and lower amount of loans and other earnings assets and lower growth rate of gross loans. However most of the findings are not statistically significant. Mixed results are found with Tier 1 ratio, precrisis returns and profitability variables. In United States ability to capture exposure to real-estate loans gave important information about the importance of real-estate sector. This data is only available for banks in United States even though it could be extremely important factor for explaining crisis performance for European banks too.
The data consist of 110 publicly traded banks in United States and European Union areas whose total assets were above 10 billion USD in the end of 2006 and who have Tier 1 ratio available for 2006. Period of financial crisis is identi-fied from October 2007 to March 2009. Returns for all of the banks in the sample are calculated for the crisis period. First mean comparison between top and bot-tom quartiles for European Union, United States and combined portfolios are done. Multiple regression analysis is used in order to identify bank characteristics explaining the performance during crisis.
The results are somewhat mixed with providing only some evidence for bank characteristics explaining the crisis performance. Bank characteristics explaining the performance are partly similar and partly differ notably between banks in European Union and United States. Best performing banks in both regions are smaller size banks with higher deposits and equity and lower amount of loans and other earnings assets and lower growth rate of gross loans. However most of the findings are not statistically significant. Mixed results are found with Tier 1 ratio, precrisis returns and profitability variables. In United States ability to capture exposure to real-estate loans gave important information about the importance of real-estate sector. This data is only available for banks in United States even though it could be extremely important factor for explaining crisis performance for European banks too.