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Determinants of Asset Value Adjustments: The Case of Germany’s Cooperative Banks

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  • Richard Reichel

Abstract

This paper studies the driving forces behind asset value adjustments in the German cooperative banking sector. Firm-specific as well as macroeconomic factors are considered. We estimate a Vector Error Correction Model for the post-unification period from 1992 to 2022. The main factor behind the improvement in value adjustments is the declining long-term interest rate. Besides these macroeconomic factors, the average bank size and the loans-to-deposits ratio are important. The trend towards larger banks has counteracted the improvement as well as the more loan-oriented business strategy of recent years. Â JEL classification numbers: C580, C58, G21, P13, P34.

Suggested Citation

  • Richard Reichel, 2024. "Determinants of Asset Value Adjustments: The Case of Germany’s Cooperative Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(2), pages 1-7.
    • Handle: RePEc:spt:apfiba:v:14:y:2024:i:2:f:14_2_7
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    References listed on IDEAS

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    1. Matthias Kowallik, 2021. "Die Coronapandemie hinterlässt Spuren – die Kernherausforderungen sind jedoch erheblicher," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 90(2), pages 81-96.
    2. Dimitrios, Anastasiou & Helen, Louri & Mike, Tsionas, 2016. "Determinants of non-performing loans: Evidence from Euro-area countries," Finance Research Letters, Elsevier, vol. 18(C), pages 116-119.
    3. Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206, March.
    4. Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206.
    5. Nir Klein, 2013. "Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance," IMF Working Papers 2013/072, International Monetary Fund.
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    More about this item

    Keywords

    Cooperative Banks; Asset Value Adjustments; Mergers; Vector Error Correction Model.;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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