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An Empirical Model for Assesing Risk and Performance in the Romanian Banking System

Author

Listed:
  • Ioan TRENCA
  • Simona MUTU

    (Babes-Bolyai University, Cluj-Napoca)

Abstract

The bank management must decide the proportion placed in different assets and liabilities in order to achieve the desired profitability level and to respect the liquidity, solvency and prudential requirements. Regarding these proportions, the objective of our article is to present a framework for modeling the risk-efficiency relationship for the Romanian banking system. To test the relationship between risk and performance we have performed the Granger causality test and the Vector Autoregressive representation for several risk and profitability variables of the Romanian banks. The result revealed significant causalities between risk and performance ratios in the 2007-2010 period.

Suggested Citation

  • Ioan TRENCA & Simona MUTU, 2011. "An Empirical Model for Assesing Risk and Performance in the Romanian Banking System," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(13), pages 89-95, December.
    • Handle: RePEc:aio:fpvfcf:v:1:y:2011:i:13:p:89-95
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    More about this item

    Keywords

    bank performance; VAR models; Granger causality;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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