Volume 21, Number 3 / September , Pages 133-210
Bank Profitability and Regulation in Emerging European Markets
Multinational Finance Journal, 2017, vol. 21, no. 3, pp. 177-210
Maria Eleni Agoraki , Athens University of Economics and Business & Panteion University, Greece    Corresponding Author
Anastasios Tsamis , Panteion University, Greece

This paper investigates the effect of bank-specific, industry-specific and macroeconomic determinants, as well as the regulatory environment on the profitability of 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 excessive foreign ownership. Using dynamic frameworks, 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. Obviously, the specific measures of economic policy must be oriented towards specific aspects of banking business. This is likely to set new standards in performance and efficiency, making 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, our evidence shows that regulation, and balance sheets are all helpful in understanding bank profitability during the crisis.

Keywords : banking sector profitability; financial crisis; regulatory framework; emerging markets
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