The nexus between underlying dynamics of bank capital buffer and performance.

Mamatzakis, Emmanuel and Bagntasarian, Anna (2019): The nexus between underlying dynamics of bank capital buffer and performance. Forthcoming in:

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Capital buffer; Dynamic threshold; Performance; Bank default risk.
• Subjects: G - Financial Economics > G0 - General; G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services

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