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Equity Returns in the Banking Sector in the Wake of the Great Recession and the European Sovereign Debt Crisis

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  • International Monetary Fund
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    Abstract

    This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment. While the equity return performance in the banking sector has been dismal in general, better capitalized and less leveraged banks have outperformed their peers, a finding that supports policymakers’ efforts to strengthen bank capitalization.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=26038
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/174.

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    Length: 22
    Date of creation: 01 Jul 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/174

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    Postal: International Monetary Fund, Washington, DC USA
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    Web page: http://www.imf.org/external/pubind.htm
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    Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    Related research

    Keywords: Banks; Economic growth; Banking sector; Credit risk; Economic recession; banking; sovereign risk; tier 1 capital; bank bond; bank capital; bank equity; bank profitability; investment banking; financial markets; bank of greece; banks ? balance sheets; bank capitalization; capital adequacy; bank value; banking supervision; bank equities; banking services; bank for international settlement; bank interest margins; banking authority; national bank; bank interest; banking sector equity; banking systems; derivatives markets; banking markets; banking activities; banking system; bonds; excess liquidity; bank bonds; interbank market; bank vulnerabilities; bank data; bank liquidity; return on assets; present value; banks with assets; bank regulations; government bonds; bank credit; liability management; bank funding; agricultural bank; bank policy; banks ? balance sheet; capital base; bank performance;

    This paper has been announced in the following NEP Reports:

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    1. Ejsing, Jacob & Lemke, Wolfgang, 2011. "The Janus-headed salvation: Sovereign and bank credit risk premia during 2008-2009," Economics Letters, Elsevier, vol. 110(1), pages 28-31, January.
    2. Altunbas, Y. & Gardener, E. P. M. & Molyneux, P. & Moore, B., 2001. "Efficiency in European banking," European Economic Review, Elsevier, vol. 45(10), pages 1931-1955, December.
    3. Asli Demirguc‐Kunt & Enrica Detragiache & Ouarda Merrouche, 2013. "Bank Capital: Lessons from the Financial Crisis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1147-1164, 09.
    4. Berger, Allen N. & Bouwman, Christa H.S., 2013. "How does capital affect bank performance during financial crises?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 146-176.
    5. Kathryn Chen & Michael Fleming & John Jackson & Ada Li & Asani Sarkar, 2011. "An analysis of CDS transactions: implications for public reporting," Staff Reports 517, Federal Reserve Bank of New York.
    6. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
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