The nexus between underlying dynamics of bank capital buffer and performance

Emmanuel Mamatzakis and Anna Bagntasarian

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Capital buffer; Dynamic threshold; Performance; Bank default risk. (search for similar items in EconPapers)
JEL-codes: G0 G1 G2 (search for similar items in EconPapers)
Date: 2019-03-14
New Economics Papers: this item is included in nep-ban, nep-eec and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92961

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