Posted Content•
Assesing The Determinants Of Bank Liquidity. Case Study Romanian Banking System
01 Jan 2016-Management Intercultural (Fundația Română pentru Inteligența Afacerii, Editorial Department)-Iss: 35, pp 67-73
TL;DR: In this paper, the authors focus on identifying the determinants of liquidity of Romanian banks and apply a regression analysis on 16 Romanian banks to analyze the relationship between bank liquidity and capital adequacy, asset quality, profitability, efficiency of financial intermediation, and the size of the banks.
Abstract: The financial crisis has highlighted the importance of liquidity risk for the banking system. Therefore, this study focuses on identifing the determinants of liquidity of Romanian banks. The data cover the period from 2006 to 2013 and take into account only bank-specific factors. The empirical study was applied on 16 Romanian banks and based on previous studies and uses different liquidity ratios, encompassing different points of view on liquidity. Regarding the explanatory variables considered in this analysis, they include various items of internal character concerning: capital adequacy, asset quality, profitability, efficiency of financial intermediation and the size of the banks. The results of our regression analysis indicate that bank liquidity is positively related to capital adequacy of banks and bank profitability and negatively related to the rate of non-performing loans, net interest margin and the size of the bank.
Citations
More filters
Posted Content•
TL;DR: In this paper, the main factors which contributed to the decline of profitability in Romanian banks in the last few years are identified and removed. But, the results are as expected but without a statistically significant relationship.
Abstract: Romanian banking system recorded a negative rate of return in recent years Therefore, this study focuses on identifying the main factors which contributed to decline of profitability in Romanian banks in the last years so that possible weaknesses and vulnerabilities to be corrected and removed For this purpose we first did a review of the literature on bank performance studies and classification of profitability determinants followed by an empirical study The empirical study was applied on 16 romanian banks for the period 2006 – 2012 and take into account bank-specific factors, industry-specific factor and macroeconomic factors The estimation results suggest that profitability of Romanian banks, measured by return on average assets, is strongly influenced by the capital adequacy, the ratio of non-performing loans, deposit and cost-to-income ratio Regarding industry-specific factor and macroeconomic factors the results are as we expected but without a statistically significant relationship
1 citations
References
More filters
TL;DR: The authors showed that bank deposit contracts can provide allocations superior to those of exchange markets, offering an explanation of how banks subject to runs can attract deposits, and showed that there are circumstances when government provision of deposit insurance can produce superior contracts.
Abstract: This paper shows that bank deposit contracts can provide allocations superior to those of exchange markets, offering an explanation of how banks subject to runs can attract deposits. Investors face privately observed risks which lead to a demand for liquidity. Traditional demand deposit contracts which provide liquidity have multiple equilibria, one of which is a bank run. Bank runs in the model cause real economic damage, rather than simply reflecting other problems. Contracts which can prevent runs are studied, and the analysis shows that there are circumstances when government provision of deposit insurance can produce superior contracts.
9,099 citations
TL;DR: This article used a pooled time series approach to estimate a linear equation, regressing performance measures against a variety of internal (staff expenses, capital ratios, liquidity ratios) and external (concentration ratios, government ownership, interest rates, market growth and inflation).
Abstract: A recent study by Bourke (1989) on the determinants of international bank profitability, replicated and extended earlier research undertaken by Short (1979), and found support for the view that concentration was positively and moderately related to profitability. The results also provide some evidence for the Edwards-Heggestad-Mingo hypothesis [Edwards and Heggestad (1973) and Heggestad and Mingo (1976)] of risk avoidance by banks with a high degree of market power. Bourke uses a pooled time series approach to estimate a linear equation, regressing performance measures against a variety of internal (staff expenses, capital ratios, liquidity ratios) and external (concentration ratios, government ownership, interest rates, market growth and inflation) determinants of bank profitability. This note replicates Bourke’s methodology in order to evaluate the determinants of European bank profitability. A sample of European banks, 671 for 1986, 1,063 for 1987, 1,371 for 1988 and 1,108 for 1989, are taken across eighteen countries. (The country breakdown is shown in the appendix.) Standardized accounting data for the banks was obtained from International Bank Credit Analysis Ltd (IBCA), a
1,224 citations
TL;DR: This paper found that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003 and that the relationship between capital and liquidity creation was positive for large banks and negative for small banks.
Abstract: Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on virtually all U.S. banks from 1993 to 2003. We find that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003. Large banks, multibank holding company members, retail banks, and recently merged banks created the most liquidity. Bank liquidity creation is positively correlated with bank value. Testing recent theories of the relationship between capital and liquidity creation, we find that the relationship is positive for large banks and negative for small banks. (JEL G21, G28, G32)
863 citations
Posted Content•
01 Jan 2006
TL;DR: This paper examined the profitability behavior of bank-specific, industry-related and macroeconomic determinants, using an unbalanced panel dataset of South Eastern European (SEE) credit institutions over the period 1998-2002.
Abstract: The aim of this study is to examine the profitability behaviour of bank-specific, industry-related and macroeconomic determinants, using an unbalanced panel dataset of South Eastern European (SEE) credit institutions over the period 1998-2002. The estimation results indicate that, with the exception of liquidity, all bank-specific determinants significantly affect bank profitability in the anticipated way. A key result is that the effect of concentration is positive, which provides evidence in support of the structure-conduct-performance hypothesis, even though some ambiguity arises given its interrelationship with the efficient-structure hypothesis. In contrast, a positive relationship between banking reform and profitability was not identified, whilst the picture regarding the macroeconomic determinants is mixed. The paper concludes with some remarks on the practicality and implementability of the findings.
461 citations
Additional excerpts
...…P. și Thorton J., (1992) constată că raportul activelor lichide la active totale prezintă o legătură negativă cu rentabilitatea activelor în timp ce Athanasoglou et al. (2006) constată că riscul de lichiditate măsurat prin raportul creditelor la total active nu are nici o influență asupra…...
[...]
TL;DR: In this article, the authors develop a model in which asset commonality and short-term debt of banks interact to generate excessive systemic risk, and show that information contagion is more likely under clustered asset structures.
398 citations