Testing for the underlying dynamics of bank capital buffer and performance nexus

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.
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Submitted on : Monday, May 13, 2019 - 3:41:42 PM
Last modification on : Tuesday, May 14, 2019 - 1:04:46 AM

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Anachit Bagntasarian, Emmanuel Mamatzakis. Testing for the underlying dynamics of bank capital buffer and performance nexus. Review of Quantitative Finance and Accounting, Springer Verlag, 2019, 52 (2), pp.347-380. ⟨10.1007/s11156-018-0712-y⟩. ⟨hal-02127592⟩

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