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Bank capital, profitability and risk in BRICS banking industry

Author

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  • Wiem Ben Jabra
  • Zouheir Mighri
  • Faysal Mansouri

Abstract

This paper analyses the relationship between bank capital, risk and profitability for the BRICS banking industry data from 2004 to 2012. We use a dynamic panel data model based on two-step GMM estimation procedure. For the sake of analysis, we differentiate between before and after crisis periods in order to highlight the impact of financial crisis on clearing up the above relationship. The main empirical results are summarised as follows: 1) capital and risk are significantly and negatively related, while capital and profitability are significantly and positively linked; 2) bank capital has the greatest positive impact on ROE measure of profitability for investment banks; 3) BRICS investment banks are likely associated with a more sound financial supervision and technology; 4) regulatory quality and institutional developments are dependent upon differences in profitability and risk; 5) Results also provide evidence that financial crisis affects considerably the relationship between capital, risk and profitability.

Suggested Citation

  • Wiem Ben Jabra & Zouheir Mighri & Faysal Mansouri, 2017. "Bank capital, profitability and risk in BRICS banking industry," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 19(1), pages 89-119.
    • Handle: RePEc:ids:gbusec:v:19:y:2017:i:1:p:89-119
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    Cited by:

    1. Nikita Singhal & Shikha Goyal & Divya Sharma & Sapna Kumari & Shweta Nagar, 2022. "Capitalization and profitability: applicability of capital theories in BRICS banking sector," Future Business Journal, Springer, vol. 8(1), pages 1-13, December.
    2. Serhat Yüksel & Shahriyar Mukhtarov & Elvin Mammadov & Mustafa Özsarı, 2018. "Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries," Economies, MDPI, vol. 6(3), pages 1-15, July.

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