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Profitability and Risk-Taking Among Cooperative Banks in the Eurozone

Author

Listed:
  • Jean-Michel Sahut

    (IDRAC Business School)

  • Faten Ben Bouheni

    (ISC Paris)

Abstract

In Europe, the banking sector is mainly composed of commercial and cooperative banks. The cooperative banks are particular because they were historically founded to improve access to finance for their members and foster self-help, responsibility and solidarity. So, they can have different objective and behavior than commercial banks, especially during crisis. This paper uses a dynamic panel of 1670 cooperative banks in the euro area to investigate the effect of economic growth and economic liberalization on cooperative banks' profitability and risk-taking from 1999 to 2015. We provide evidence that cooperative banks have relatively higher financial stability with relatively less risk-taking than other banks. In addition, smallest cooperative banks are less efficient and more exposed to risk than largest banks. Deepen analysis shows that before the 2008 financial crisis, economic growth and liberalization boost banking profitability and reduce insolvency and lending risks of cooperative banks. However, after this crisis, the scanty economic growth in the euro area weakens banking profitability and increases insolvency and lending risks. Moreover, cooperative banks in countries without troika bailouts manage better their risk-taking than cooperative banks operating in countries with troika assistance. Finally, German cooperative banks' profitability and risk-taking are counter-cycle.

Suggested Citation

  • Jean-Michel Sahut & Faten Ben Bouheni, 2019. "Profitability and Risk-Taking Among Cooperative Banks in the Eurozone," Economics Bulletin, AccessEcon, vol. 39(2), pages 1103-1117.
  • Handle: RePEc:ebl:ecbull:eb-19-00264
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    References listed on IDEAS

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    More about this item

    Keywords

    Profitability; risk-taking; cooperative banks; economic growth; economic liberalization; dynamic panel;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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