The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries
By using Arellano and Bond GMM estimator, this paper analyzes how the regulation framework of Basel, affects the profitability level of the banking industry. The data consists of savings and commercial banks located in 16 different OECD countries over the time period from 1992 to 2009. The cross-cou...
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ndltd-UPSALLA1-oai-DiVA.org-kth-1244342013-08-10T04:23:43ZThe effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countriesengSiljeström, Ann-KristinKTH, Entreprenörskap och Innovation2013Baselbank regulationrecessioncapital requirementsbusiness cycleBy using Arellano and Bond GMM estimator, this paper analyzes how the regulation framework of Basel, affects the profitability level of the banking industry. The data consists of savings and commercial banks located in 16 different OECD countries over the time period from 1992 to 2009. The cross-country study, evaluates, whether increased capital requirements have a negative effect on bank profitability, meaning, if banks that keep a larger capital buffer earn a lower return or if banks that increase capital are better prepared for the financial crisis and therefore manage to get a better return. To evaluate the effect, the time period utilized is divided into a pre-crisis period (1992 to 2007), which is compared with an average over the total period (1992-2009). The measure of profitability is the return on equity and to control for business cycle fluctuations macro economic factors are included. Previous research results are scattered and indicate that decreased risk taking increases profitability, meanwhile increased regulation decreases profitability. The main findings in this paper are that Tier 1 capital and risk-weighted assets have a negative effect on profitability, whereas the capital buffer illustrates a positive effect. Student thesisinfo:eu-repo/semantics/bachelorThesistexthttp://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-124434Examensarbete INDEKapplication/pdfinfo:eu-repo/semantics/openAccess |
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Basel bank regulation recession capital requirements business cycle |
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Basel bank regulation recession capital requirements business cycle Siljeström, Ann-Kristin The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
description |
By using Arellano and Bond GMM estimator, this paper analyzes how the regulation framework of Basel, affects the profitability level of the banking industry. The data consists of savings and commercial banks located in 16 different OECD countries over the time period from 1992 to 2009. The cross-country study, evaluates, whether increased capital requirements have a negative effect on bank profitability, meaning, if banks that keep a larger capital buffer earn a lower return or if banks that increase capital are better prepared for the financial crisis and therefore manage to get a better return. To evaluate the effect, the time period utilized is divided into a pre-crisis period (1992 to 2007), which is compared with an average over the total period (1992-2009). The measure of profitability is the return on equity and to control for business cycle fluctuations macro economic factors are included. Previous research results are scattered and indicate that decreased risk taking increases profitability, meanwhile increased regulation decreases profitability. The main findings in this paper are that Tier 1 capital and risk-weighted assets have a negative effect on profitability, whereas the capital buffer illustrates a positive effect. |
author |
Siljeström, Ann-Kristin |
author_facet |
Siljeström, Ann-Kristin |
author_sort |
Siljeström, Ann-Kristin |
title |
The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
title_short |
The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
title_full |
The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
title_fullStr |
The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
title_full_unstemmed |
The effect of Basel regulation on banking profitability : A cross-country study on 16 OECD countries |
title_sort |
effect of basel regulation on banking profitability : a cross-country study on 16 oecd countries |
publisher |
KTH, Entreprenörskap och Innovation |
publishDate |
2013 |
url |
http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-124434 |
work_keys_str_mv |
AT siljestromannkristin theeffectofbaselregulationonbankingprofitabilityacrosscountrystudyon16oecdcountries AT siljestromannkristin effectofbaselregulationonbankingprofitabilityacrosscountrystudyon16oecdcountries |
_version_ |
1716596062110613504 |