Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19776
Authors: 
Beckmann, Rainer
Year of Publication: 
2007
Series/Report no.: 
Discussion Paper, Series 2: Banking and Financial Supervision 2007,17
Abstract: 
This paper analyses structural and cyclical determinants of banking profitability in 16 Western European countries. We find that financial structure matters, particularly through the beneficial effect of the capital market orientation in the respective national financial system. Furthermore, higher diversification regarding banks' income sources shows a positive effect. The industry concentration of national banking systems, though, does not significantly affect aggregate profitability. Business cycle effects, in particular lagged GDP growth, display a substantial procyclical impact on bank profits. These results are obtained in a single equation panel framework using the Hausman-Taylor instrument variable estimator. The data set comprises aggregate annual country data and banking group data (commercial banks, cooperative banks and savings banks) over the period 1979-2003.
Subjects: 
bank profits
financial structure
business cycle
JEL: 
G21
E32
L11
Document Type: 
Working Paper

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