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Impact of the Subprime Crisis on Commercial Banks’ Financial Performance

Author

Listed:
  • Hao Fang

    () (Department of Assets and Property Management, Hwa Hsia Institute of Technology, Taiwan)

  • Yang-Cheng Lu

    () (Department of Finance, Ming Chuan University, Taiwan)

  • Chi-Wei Su

    () (Department of Finance, Ocean University of China, Qingdao, Shandong, China)

Abstract

We investigated changes in the financial performance of representatives of the world’s top 200 commercial banks after the global subprime financial crisis. Our empirical results show that following the subprime-crisis disclosure, all commercial banks exhibited worse performance in asset quality, profitability, liquidity, and growth index, accompanied by risk increases in asset adequacy, managerial ability, profitability, and growth index. Developed markets have suffered a greater negative influence than emerging markets, causing downward pressure on asset adequacy, asset quality, and profitability since the subprime crisis. Commercial banks within developed nations suffered more direct pronounced effects from the subprime crisis than did those in emerging markets. Our results prove that larger commercial banks, particularly those with larger capitalization, have the economies-of-scale advantage to resist the negative effects of economic downturns.

Suggested Citation

  • Hao Fang & Yang-Cheng Lu & Chi-Wei Su, 2013. "Impact of the Subprime Crisis on Commercial Banks’ Financial Performance," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 593-614, September.
  • Handle: RePEc:voj:journl:v:60:y:2013:i:5:p:593-614
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    References listed on IDEAS

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    Cited by:

    1. repec:voj:journl:v:63:y:2016:i:4:p:441-454 is not listed on IDEAS
    2. Hansjörg Herr, 2014. "The European Central Bank and the US Federal Reserve as Lender of Last Resort," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, pages 59-78.

    More about this item

    Keywords

    Subprime crisis; Financial performance; Commercial banks; CAMELS; Capitalization distribution;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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