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Commercial property prices and bank performance

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  • Davis, E. Philip
  • Zhu, Haibin

Abstract

We seek to assess the relationship between commercial property price movements and the behavior and performance of individual banks in a range of industrialized economies, extending the existing micro literature on bank performance. Our results suggest that commercial property prices tend to be positively associated with bank lending and profitability, and negatively associated with banks' net interest margin and bad loan ratios. Further extensions show that the degree to which such a relationship holds is related to the size of the bank. The results underline the relevance of commercial property prices as a macroprudential variable that warrants scrutiny by the authorities.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 49 (2009)
Issue (Month): 4 (November)
Pages: 1341-1359

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Handle: RePEc:eee:quaeco:v:49:y:2009:i:4:p:1341-1359

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Web page: http://www.elsevier.com/locate/inca/620167

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Keywords: Commercial property prices Bank performance Panel estimation Financial accelerator;

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References

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Citations

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Cited by:
  1. E. Philip Davis & Haibin Zhu, 2004. "Bank lending and commercial property cycles: some cross-country evidence," BIS Working Papers 150, Bank for International Settlements.
  2. Davis, E. Philip & Karim, Dilruba, 2008. "Comparing early warning systems for banking crises," Journal of Financial Stability, Elsevier, vol. 4(2), pages 89-120, June.
  3. Michal Hlavacek & Ondrej Novotny & Marek Rusnak, 2014. "Office Property in Central European Countries," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2013/2014, chapter 0, pages 148-155 Czech National Bank, Research Department.
  4. Beckmann, Rainer, 2007. "Profitability of Western European banking systems: panel evidence on structural and cyclical determinants," Discussion Paper Series 2: Banking and Financial Studies 2007,17, Deutsche Bundesbank, Research Centre.
  5. K. Batu Tunay, 2010. "Banking Crises and Early Warning Systems: A Model Suggestion for Turkish Banking Sector," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 4(1), pages 9-46.
  6. Karim, Dilruba & Liadze, Iana & Barrell, Ray & Davis, E. Philip, 2013. "Off-balance sheet exposures and banking crises in OECD countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 673-681.
  7. Augustyniak, Hanna & Łaszek, Jacek & Olszewski, Krzysztof & Waszczuk, Joanna, 2012. "Cykle na rynku nieruchomości mieszkaniowych i komercyjnych, ryzyko dla inwestora oraz potrzeba adekwatnej i ostrożnej wyceny
    [Cycles on the housing and commercial real estate market, risks and th
    ," MPRA Paper 41070, University Library of Munich, Germany.
  8. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.
  9. Krzysztof Olszewski, 2013. "The Commercial Real Estate Market, Central Bank Monitoring and Macroprudential Policy," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 5(2), pages 213-250, December.
  10. Phong T. H. Ngo, 2006. "Endogenous Capital and Profitability in Banking," ANU Working Papers in Economics and Econometrics 2006-464, Australian National University, College of Business and Economics, School of Economics.
  11. António Miguel Martins & Ana Paula Serra, 2012. "Real Estate Market Risk in Bank Stock Returns: Evidence for 15 European Countries," CEF.UP Working Papers 1203, Universidade do Porto, Faculdade de Economia do Porto.

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