IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Financial depression and the profitability of the banking sector of the Republic of Korea: panel evidence on bank-specific and macroeconomic determinants

  • Fadzlan Sufian

    ()

    (Assistant Vice President of Khazanah Research and Investment Strategy, Khazanah Nasional Berhad, Malaysia and the Department of Economics and the Faculty of Economics and Management, Universiti Putra Malaysia.)

The paper provides new empirical evidence on factors that determine the profitability of the banking sector of the Republic of Korea. The empirical findings indicate that the banks of the Republic of Korea with high capitalization levels tend to have higher profitability levels. However, the impact of credit is consistently negative under both controlled and uncontrolled macroeconomic and financial conditions. Meanwhile, the effect of the business cycle towards the profitability of banks are mixed. On the one hand, inflation displays a pro-cyclical impact, while gross domestic product (GDP) has a counter-cyclical influence on the banks’ profitability. The findings also indicate that the industry concentration of the national banking system has a positive as well as a significant effect on the banks. The study is based on data from the period 1994-2008. This period is broken down into 4 sub-periods, the tranquil period before the Asian financial crisis (1994-1996), the Asian financial crisis (1997-1998), the tranquil period between the Asian financial crisis and recent global financial crisis (1999-2008) and recent global crisis (2008). The impacts of both the Asian financial crisis and the recent global financial crisis are negative, while the banks have been relatively more profitable during both the tranquil periods.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.unescap.org/sites/default/files/apdj-17-2-3-Sufian.pdf
Download Restriction: no

Article provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its journal Asia-Pacific Development Journal.

Volume (Year): 17 (2010)
Issue (Month): 2 (December)
Pages: 65-92

as
in new window

Handle: RePEc:unt:jnapdj:v:17:y:2010:i:2:p:65-92
Contact details of provider: Postal: The United Nations Building, Rajadamnern Nok Avenue, Bangkok 10200
Phone: (66-2) 288-1234
Fax: (66-2) 288-1000
Web page: http://www.unescap.org/
Email:


More information through EDIRC

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.:

as in new window
  1. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997. "The effects of megamergers on efficiency and prices: evidence from a bank profit function," Finance and Economics Discussion Series 1997-9, Board of Governors of the Federal Reserve System (U.S.).
  2. Nicola Cetorelli & Michele Gambera, 1999. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Center for Financial Institutions Working Papers 00-19, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Fadzlan SUFIAN & Muzafar Shah HABIBULLAH, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China, Higher Education Press, vol. 4(2), pages 274-291, June.
  4. Ihsan Isik & M. Kabir Hassan, 2003. "Efficiency, Ownership and Market Structure, Corporate Control and Governance in the Turkish Banking Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9-10), pages 1363-1421.
  5. Kyriaki Kosmidou, 2008. "The determinants of banks' profits in Greece during the period of EU financial integration," Managerial Finance, Emerald Group Publishing, vol. 34(3), pages 146-159.
  6. Kosmidou, Kyriaki & Pasiouras, Fotios & Tsaklanganos, Angelos, 2007. "Domestic and multinational determinants of foreign bank profits: The case of Greek banks operating abroad," Journal of Multinational Financial Management, Elsevier, vol. 17(1), pages 1-15, February.
  7. David Hauner, 2004. "Explaining Efficiency Differences Among Large German and Austrian Banks," IMF Working Papers 04/140, International Monetary Fund.
  8. Kyriaki Kosmidou & Constantin Zopounidis, 2008. "Measurement of Bank Performance in Greece," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 6(1), pages 79-95.
  9. Stephen Miller & Athanasios Noulas, 1997. "Portfolio mix and large-bank profitability in the USA," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 505-512.
  10. Isik, Ihsan & Hassan, M. Kabir, 2002. "Technical, scale and allocative efficiencies of Turkish banking industry," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 719-766, April.
  11. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  12. J.A. Bikker & H. Hu, 2003. "Cyclical Patterns in Profits, Provisioning and Lending of Banks," DNB Staff Reports (discontinued) 86, Netherlands Central Bank.
  13. Samy Bennaceur, Mohamed Goaied, 2008. "The Determinant of Commercial Bank Interest Margin and Profitability: Evidence from Tunisia," Frontiers in Finance and Economics, SKEMA Business School, vol. 5(1), pages 106-130, April.
  14. Eichengreen, Barry & Gibson, Heather D, 2001. "Greek Banking at the Dawn of the New Millennium," CEPR Discussion Papers 2791, C.E.P.R. Discussion Papers.
  15. 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.
  16. Samy Ben Naceur & Mohammed Omran, 2008. "The Effects of Bank Regulations, Competition and Financial Reforms on MENA Banks’ Profitability," Working Papers 449, Economic Research Forum, revised Oct 2008.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:unt:jnapdj:v:17:y:2010:i:2:p:65-92. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Macroeconomic Policy and Development Division, ESCAP)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.