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A Canonical Correlation Analysis of Commercial Bank Asset/Liability Structures

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  • Simonson, Donald G.
  • Stowe, John D.
  • Watson, Collin J.

Abstract

Commercial banks have been the subjects of a large body of empirical research employing regression and econometric models and discriminant analysis. The purpose of this paper is to empirically identify and describe relationships, including hedging behavior, between the asset side and the liability/capital side of the balance sheets of a cross-section of large U.S. banks. Canonical correlation analysis is the statistical technique that is employed. Unlike regression analysis which explains the behavior of a single dependent variable as a function of a set of independent variables, canonical correlation analysis relates two sets of variables. In the present case, one set of variables is the composition of the lefthand side of the balance sheet and the other set is the right-hand side. The variables used in this study are asset and liability/capital categories expressed as a proportion of total bank assets (i.e., a percentage breakdown of the balance sheet or a common size statement). These proportions are used in lieu of the more usual financial ratios and no information exogenous to the bank is employed.

Suggested Citation

  • Simonson, Donald G. & Stowe, John D. & Watson, Collin J., 1983. "A Canonical Correlation Analysis of Commercial Bank Asset/Liability Structures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(1), pages 125-140, March.
    • Handle: RePEc:cup:jfinqa:v:18:y:1983:i:01:p:125-140_01
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    Cited by:

    1. Christoph Memmel & Andrea Schertler, 2012. "The Dependency of the Banks' Assets and Liabilities: Evidence from Germany," European Financial Management, European Financial Management Association, vol. 18(4), pages 602-619, September.
    2. Donald R. Epley & Kartono Liano, 1999. "The Residential Mortgage Supply Function of Commercial Banks," Urban Studies, Urban Studies Journal Limited, vol. 36(11), pages 1959-1971, October.
    3. DeYoung, Robert & Yom, Chiwon, 2008. "On the independence of assets and liabilities: Evidence from U.S. commercial banks, 1990-2005," Journal of Financial Stability, Elsevier, vol. 4(3), pages 275-303, September.
    4. Lawrence, Edward C., 1997. "The viability of minority-owned banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 1-21.
    5. Bharati, Rakesh & Nanisetty, Prasad & So, Jacky, 2006. "Dynamic gap transformations: Are banks asset - transformers or brokers? or both?," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(1), pages 36-52, February.
    6. Ken B. Cyree & Travis R. Davidson & John D. Stowe, 2020. "Forming appropriate peer groups for bank research: a cluster analysis of bank financial statements," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(2), pages 211-237, April.
    7. Ioan Trenca & Daniela Bozga & Daniela Zapodeanu & Mihail Ioan Cociuba, 2017. "Considerations On The Strategy Of Commercial Banks In The Context Of The Financial System Development For The Period 2005-2013," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 248-258, December.
    8. Alexey Ponomarenko, 2017. "A note on money creation in emerging market economies," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 9(1), pages 70-85, April.
    9. P. K. Jain & V. Gupta, 2004. "Asset-Liability Management among Commercial Banks in India — A Canonical Correlation Analysis," Vision, , vol. 8(1), pages 25-40, January.
    10. Cociuba Mihail Ioan, 2015. "Did The Economic Crises Influence The Structure Of Assets-Liabilities In Banks?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 407-415, December.
    11. Sotiris K. Staikouras, 2006. "Financial Intermediaries and Interest Rate Risk: II," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 15(5), pages 225-272, December.
    12. Donald R. Epley, 2001. "US Real Estate Agent Income and Commercial/Investment Activities," Journal of Real Estate Research, American Real Estate Society, vol. 21(3), pages 221-244.
    13. repec:zbw:bofitp:2016_004 is not listed on IDEAS
    14. Muhammad Surajo Sanusi & Farooq Ahmad, 2019. "Measuring Predictability of Oil and Gas Stock Returns and Performance of Moving Average Trading Rules," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(1), pages 47-70.

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