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The determinants of credit and insolvency risk of European commercial banks: a dynamic panel data analysis

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  • Wiem Ben Jabra
  • Zouheir Mighri
  • Faysal Mansouri

Abstract

This paper investigates the impact of both bank-specific and macroeconomic determinants on banking risk. A dynamic panel data regression analysis is applied to a large sample of 280 commercial banks operating in the euro area during the period 2003-2013. The main empirical results are as follows: (i) Economic growth, inflation, regulatory quality, insurance coverage and bank size are inversely and significantly related to credit risk, while capitalisation and competition are positively and significantly related to credit risk. (ii) Economic growth, inflation, capitalisation and regulatory quality are positively related to insolvency risk, while bank size, competition and deposit insurance coverage are negatively associated to insolvency risk.

Suggested Citation

  • Wiem Ben Jabra & Zouheir Mighri & Faysal Mansouri, 2017. "The determinants of credit and insolvency risk of European commercial banks: a dynamic panel data analysis," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 10(2), pages 111-143.
    • Handle: RePEc:ids:ijmefi:v:10:y:2017:i:2:p:111-143
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    Cited by:

    1. Carmen Orden‐Cruz & Jessica Paule‐Vianez & Júlio Lobão, 2023. "The effect of Economic Policy Uncertainty on the credit risk of US commercial banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3420-3436, July.
    2. Van Dan Dang, 2020. "Bank funding and liquidity in an emerging market," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 13(3), pages 256-272.
    3. Mustafa Tevfik Kartal & Derviş Kirikkaleli & Fatih Ayhan, 2023. "Nexus between non‐performing loans and economic growth in emerging countries: Evidence from Turkey with wavelet coherence approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1250-1260, April.

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