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Is the leverage of European banks procyclical?

Author

Listed:
  • A. Baglioni
  • E. Beccalli
  • A. Boitani

    ()

  • A. Monticini

Abstract

Detecting whether banks’ leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side financial accelerator, whilst finding a plausible explanation of banks’ behaviour is crucial to trace the road for a sensible reform of financial regulation and managers’ incentives. By analyzing a large sample of European banks, we show that procyclical leverage appears to be well entrenched in the behaviour of those banks for which investment banking prevails over the traditional commercial banking activity. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • A. Baglioni & E. Beccalli & A. Boitani & A. Monticini, 2013. "Is the leverage of European banks procyclical?," Empirical Economics, Springer, vol. 45(3), pages 1251-1266, December.
  • Handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1251-1266
    DOI: 10.1007/s00181-012-0655-4
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Baltzer, Markus & Koehl, Alexandra & Reitz, Stefan, 2019. "Procyclical leverage in Europe and its role in asset pricing," Discussion Papers 10/2019, Deutsche Bundesbank.
    2. Justine Pedrono & Aurélien Violon, 2016. "Banks' Leverage Procyclicality: Does US Dollar Diversification Really Matter?," Working Papers halshs-01216658, HAL.
    3. Mamatzakis, Emmanuel & Bermpei, Theodora, 2014. "What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 102-117.
    4. Beccalli, Elena & Boitani, Andrea & Di Giuliantonio, Sonia, 2015. "Leverage pro-cyclicality and securitization in US banking," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 200-230.
    5. Boitani, Andrea & Punzo, Chiara, 2019. "Banks’ leverage behaviour in a two-agent new Keynesian model," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 347-359.
    6. Nina Boyarchenko & Philippe Mueller, 2019. "Corporate Credit Provision," Staff Reports 895, Federal Reserve Bank of New York.
    7. Justine Pedrono & Aurélien Violon, 2017. "Banks' leverage Procyclicality: Does Currency Diversification Matter?," Working Papers 2017-09, CEPII research center.
    8. Justine Pedrono & Aurélien Violon, 2016. "Banks' Capital Structure and US Dollar Diversification of Assets: Does Reduction in Systemic Risk Offset Agency Costs?," AMSE Working Papers 1610, Aix-Marseille School of Economics, France.
    9. Justine Pedrono, 2015. "Banking Leverage with Currency Diversification," AMSE Working Papers 1539, Aix-Marseille School of Economics, France, revised Sep 2015.
    10. Justine Pedrono, 2015. "Banking Leverage Procyclicality: A Theoretical Model Introducing Currency Diversification," Working Papers halshs-01203758, HAL.
    11. Justine Pedrono & Aurélien Violon, 2015. "Bank Leverage: Does Currency Diversification Really Matter?," AMSE Working Papers 1543, Aix-Marseille School of Economics, France, revised 16 Oct 2015.
    12. Beccalli, Elena & Frantz, Pascal & Lenoci, Francesca, 2018. "Hidden effects of bank recapitalizations," Journal of Banking & Finance, Elsevier, vol. 94(C), pages 297-314.
    13. Mohd Afandi Abu Bakar* & Noormahayu Mohd Nasir & Farrah Dina Abd Razak & Nor Samsinar Kamsi & Asmalia Che Ahmad, 2018. "Provision for Bad & Doubtful Financing and Contingency Reserve Management: Assessing Resilient and Stable Islamic Banks," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 621-627:6.

    More about this item

    Keywords

    Banks; Procyclicality; Financial regulation; Leverage; G21; E3;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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