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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.

Suggested Citation

  • Davis, E. Philip & Zhu, Haibin, 2009. "Commercial property prices and bank performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(4), pages 1341-1359, November.
  • Handle: RePEc:eee:quaeco:v:49:y:2009:i:4:p:1341-1359
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    More about this item

    Keywords

    Commercial property prices Bank performance Panel estimation Financial accelerator;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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