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Banking industry performance in the wake of the global financial crisis

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  • Bhimjee, Diptes C.
  • Ramos, Sofia B.
  • Dias, José G.

Abstract

This paper analyzes the performance of the banking industry both prior to and during the global financial crisis (GFC). Through the application of a panel regime-switching model designed to capture heterogeneity, our findings suggest that global banking performance can be grouped into two distinctive clusters, each with its own specific regime dynamics. Before the crisis, a cluster of banking institutions pertaining to advanced economies stood out for its buoyant stock market performance, whereas a second cluster, mainly composed of banking indexes that belong to emerging economies, exhibited a more subdued performance. Further, this differentiation was accompanied by low regime synchronization between the clusters. During the crisis, banking institutions behaved similarly, regime synchronization increased, and the differences in the regime dynamics vanished. Finally, the GFC constituted a highly synchronized and systemic extreme financial event, as evidenced by our findings depicting the onset of severe underlying international financial contagion processes.

Suggested Citation

  • Bhimjee, Diptes C. & Ramos, Sofia B. & Dias, José G., 2016. "Banking industry performance in the wake of the global financial crisis," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 376-387.
    • Handle: RePEc:eee:finana:v:48:y:2016:i:c:p:376-387
    DOI: 10.1016/j.irfa.2016.01.005
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    3. Degl'Innocenti, Marta & Grant, Kevin & Šević, Aleksandar & Tzeremes, Nickolaos G., 2018. "Financial stability, competitiveness and banks' innovation capacity: Evidence from the Global Financial Crisis," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 35-46.
    4. Maria‐Eleni K. Agoraki & Georgios P. Kouretas & Anastassios Tsamis, 2021. "The determinants of performance in the Eurozone banking sector: Core versus periphery Eurozone economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 416-429, January.
    5. Mohanty, Sunil K. & Akhigbe, Aigbe & Basheikh, Abdulrahman & Khan, Haroon ur Rashid, 2018. "The Dodd-Frank Act and Basel III: Market-based risk implications for global systemically important banks (G-SIBs)," Journal of Multinational Financial Management, Elsevier, vol. 47, pages 91-109.
    6. Violeta Domanovic & Violeta Todorovic & Sladjana Savovic, 2018. "Internal factors of bank profitability in the Republic of Serbia," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 659-673, June.
    7. Berna Aydogan, 2017. "Sentiment dynamics and volatility of international stock markets," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 407-419, December.
    8. Stefan Abrantes Costa & Pedro Manuel Nogueira Reis & Antonio Pedro Soares Pinto, 2020. "Subjective/ Behavioural Factors Influence the PSI 20 and IBEX 35," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 13-27, October.
    9. Danso, Albert & Lartey, Theophilus & Amankwah-Amoah, Joseph & Adomako, Samuel & Lu, Qinye & Uddin, Moshfique, 2019. "Market sentiment and firm investment decision-making," International Review of Financial Analysis, Elsevier, vol. 66(C).
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    More about this item

    Keywords

    Global financial crisis; International financial contagion; ‘Subprime’ crisis; Banking institutions; Heterogeneous regime-switching model (HRSM);
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General

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