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Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability

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Author Info
Panayiotis P. Athanasoglou () (Bank of Greece)
Sophocles N. Brissimis (Bank of Greece, Economic Research Department and University of Piraeus)
Matthaios D. Delis (Athens University of Economics and Business)

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Abstract

The aim of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct-Performance (SCP) hypothesis. To account for profit persistence, we apply a GMM technique to a panel of Greek banks that covers the period 1985-2001. The estimation results show that profitability persists to a moderate extent, indicating that departures from perfectly competitive market structures may not be that large. All bank-specific determinants, with the exception of size, affect bank profitability significantly in the anticipated way. However, no evidence is found in support of the SCP hypothesis. Finally, the business cycle has a positive, albeit asymmetric effect on bank profitability, being significant only in the upper phase of the cycle.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200525.pdf
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Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 25.

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Length: 35 pages
Date of creation: Jun 2005
Date of revision:
Publication status: Forthcoming in Journal of International Financial Markets, Institutions & Money
Handle: RePEc:bog:wpaper:25

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Related research
Keywords: Bank profitability; business cycles and profitability; dynamic panel data model;

Other versions of this item:

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-83, June.
    Other versions:
  2. Shaffer, Sherrill, 2004. "Comment on "What Drives Bank Competition? Some International Evidence" by Stijn Claessens and Luc Laeven," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 585-92, June.
  3. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank. [Downloadable!]
  4. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October. [Downloadable!] (restricted)
  5. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July. [Downloadable!] (restricted)
  6. Sherrill Shaffer, 1994. "Bank competition in concentrated markets," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 3-16. [Downloadable!]
  7. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-89, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Abdelaziz Rouabah, 2006. "La sensibilité de l'activité bancaire aux chocs macroéconomiques : une analyse en panel sur des données de banques luxembourgeoises," BCL working papers 21, Central Bank of Luxembourg. [Downloadable!]
  2. Eleni Angelopoulou, 2005. "The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK," Working Papers 27, Bank of Greece. [Downloadable!]
  3. Sven W. Arndt, 2006. "Regional Currency Arrangements in North America," Working Papers 40, Bank of Greece. [Downloadable!]
    Other versions:
  4. Fadzlan Sufian & Muzafar Habibullah, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China, Springer, vol. 4(2), pages 274-291, June. [Downloadable!] (restricted)
  5. George S. Tavlas & P.A.V.B. Swamy, 2006. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Working Papers 34, Bank of Greece. [Downloadable!]
    Other versions:
  6. Biswa Swarup Misra, . "The Performance of Regional Rural Banks (RRBs) in India:Has Past Anything to Suggest for Future?," Journals, esocialsciences.com. [Downloadable!]
  7. Delis, Manthos D, 2008. "Competitive conditions in the Central and Eastern European banking systems," MPRA Paper 13890, University Library of Munich, Germany. [Downloadable!]
  8. Sophocles N. Brissimis & Manthos D. Delis & Nikolaos I. Papanikolaou, 2008. "Exploring the Nexus between Banking Sector Reform and Performance: Evidence from Newly Acceded EU Countries," Working Papers 73, Bank of Greece. [Downloadable!]
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  9. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 41, Bank of Greece. [Downloadable!]
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  10. Athanasoglou, Panayiotis & Delis, Manthos & Staikouras, Christos, 2006. "Determinants Of Bank Profitability In The South Eastern European Region," MPRA Paper 10274, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  11. Richard N. Cooper & Michael Bordo & Harold James, 2006. "What About a World Currency? Proposal for a Common Currency among Rich Democracies. One World Money, Then and Now," Working Papers 44, Bank of Greece. [Downloadable!]
  12. Phong T. H. Ngo, 2006. "Endogenous Capital and Profitability in Banking," ANUCBE School of Economics Working Papers 2006-464, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  13. Panayiotis P. Athanasoglou & Evangelia A. Georgiou & Christos C. Staikouras, 2008. "Assessing Output and Productivity Growth in the Banking Industry," Working Papers 92, Bank of Greece. [Downloadable!]
  14. Christos Papazoglou, 2005. "Real Exchange Rate Dynamics and Output Contraction under Transition," Working Papers 29, Bank of Greece. [Downloadable!]
  15. David Liebeg & Markus S. Schwaiger, 2006. "Determinants of the Interest Rate Margins of Austrian Banks," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 12, pages 104-116, December. [Downloadable!]
  16. Andreas S. Andreou & George A. Zombanakis, 2006. "Computational Intelligence in Exchange-Rate Forecasting," Working Papers 49, Bank of Greece. [Downloadable!]
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