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The nexus between underlying dynamics of bank capital buffer and performance

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  • Mamatzakis, Emmanuel
  • Bagntasarian, Anna

Abstract

This paper reveals the underlying dynamics between the capital buffer and bank performance in EU-27 countries. A dynamic panel analysis shows that capital buffer is significantly affected by bank performance and risk exposure. Remarkably, a threshold analysis identifies regime changes for the underlying relationships during the financial crisis of 2008. We find a positive relationship between the capital buffer and performance for banks that fall in the low performance regime, while a negative relationship is reported for the banks that belong to the high regime. Threshold results also show that buffer exerts a positive impact on bank performance. Although regulation reforms that aim to raise the capital requirements could improve bank performance and stability, these improvements are not homogeneous across banks.

Suggested Citation

  • Mamatzakis, Emmanuel & Bagntasarian, Anna, 2019. "The nexus between underlying dynamics of bank capital buffer and performance," MPRA Paper 92961, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:92961
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    File URL: https://mpra.ub.uni-muenchen.de/92961/1/MPRA_paper_92961.pdf
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    More about this item

    Keywords

    Capital buffer; Dynamic threshold; Performance; Bank default risk.;

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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