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Convergence and clustering of Tier 1 capital in the European banking sector: a non-linear factor approach

Author

Listed:
  • Nicholas Apergis
  • Alexandros Gabrielsen
  • James E. Payne
  • Paolo Zagaglia

Abstract

This short communication examines the convergence of the Tier 1 capital ratio in the banking sector across the EMU. The study applies the Phillips-Sul convergence and clustering algorithm for 251 European banks over annual periods from 1990 to 2010. The null hypothesis of full convergence is rejected; however, the convergence tests reveal heterogeneity in the Tier 1 capital ratio in the European banking sector, with five distinct clusters.

Suggested Citation

  • Nicholas Apergis & Alexandros Gabrielsen & James E. Payne & Paolo Zagaglia, 2012. "Convergence and clustering of Tier 1 capital in the European banking sector: a non-linear factor approach," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 5(2), pages 210-221.
    • Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:210-221
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