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Bank Profitability: Good for Growth?

Author

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  • Paul-Olivier KLEIN

    (LaRGE Research Center, Université de Strasbourg)

  • Laurent WEILL

    () (LaRGE Research Center, Université de Strasbourg)

Abstract

The aim of this paper is to provide the first investigation of the impact of bank profitability on economic growth. While bank profitability can be pro-growth by fostering financial stability, it can also result from lower competition which reduce access to credit and diminish economic growth. We analyze the impact of bank profitability on economic growth using a sample of 133 countries for the period 1999-2013. Our findings support the view that bank profitability fosters economic growth. Additional tests confirm the robustness of this conclusion. Thus, measures that favor bank profitability are growth-enhancing.

Suggested Citation

  • Paul-Olivier KLEIN & Laurent WEILL, 2017. "Bank Profitability: Good for Growth?," Working Papers of LaRGE Research Center 2017-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2017-02
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    Cited by:

    1. Trofimov, Ivan D. & Md. Aris, Nazaria & Ying Ying, Jovena Kho, 2018. "Determinants of Commercial Banks' Profitability in Malaysia," MPRA Paper 85598, University Library of Munich, Germany.

    More about this item

    Keywords

    bank profitability; financial development; economic growth; finance-growth nexus.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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