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Do equity investments affect banks' profitability? Evidence from OECD countries

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  • Francisco Gonzalez

Abstract

This paper analyses the influence of equity investments on banks' profitability in a panel data of 24 OECD countries. The results suggest a positive influence of banks' equity investments on banks' interest rate margin and banks' net income that is not outweighed by additional requirements of provisions and capital that supervisory authorities establish to control bank risk. The positive effect equity investments have on banks' interest margin is consistent with the banks' ability as shareholders to obtain benefits in the lending relationship they also keep with firms.

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  • Francisco Gonzalez, 2004. "Do equity investments affect banks' profitability? Evidence from OECD countries," Applied Financial Economics, Taylor & Francis Journals, vol. 14(15), pages 1111-1124.
    • Handle: RePEc:taf:apfiec:v:14:y:2004:i:15:p:1111-1124
    DOI: 10.1080/09603100412331297669
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