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Banks' profitability, institutions, and regulation in the context of the financial crisis

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  • João C.A. Teixeira
  • Francisco J.F. Silva
  • Fernando A.T. Costa
  • Dário M.C. Martins
  • Maria da Graça Batista

Abstract

This paper empirically examines how banks' dividend policy, the institutional environment, and banking regulation affects banks' profitability using panel data of a sample of 567 banks, mainly from Organisation for Economic Cooperation and Development countries, for 2004–2015. It further examines whether the effect of the institutional environment and banking regulation varies for crisis and noncrisis years. The estimation results reveal that banks' dividend policy influences positively banks' profitability, whereas higher levels of the institutional environment or stricter banking regulation reduces banks' profitability. The negative effect of the institutional environment and banking regulation was of lower magnitude during the global financial crisis, followed by the Eurozone crisis, and for less‐developed countries and larger banks.

Suggested Citation

  • João C.A. Teixeira & Francisco J.F. Silva & Fernando A.T. Costa & Dário M.C. Martins & Maria da Graça Batista, 2020. "Banks' profitability, institutions, and regulation in the context of the financial crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 297-320, April.
    • Handle: RePEc:wly:ijfiec:v:25:y:2020:i:2:p:297-320
    DOI: 10.1002/ijfe.1753
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    Cited by:

    1. Cristian Barra & Anna Papaccio & Nazzareno Ruggiero, 2023. "Basel accords and banking inefficiency: Evidence from the Italian local market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4079-4119, October.
    2. David Blanco‐Alcántara & Jorge Gallud‐Cano & Félix J. López‐Iturriaga & Óscar López‐de‐Foronda, 2022. "Have European banks maintained their payout policy during the crisis? The role of scrip dividends," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4619-4632, October.
    3. Chrysanthopoulou Xakousti & Mylonidis Nikolaos & Sidiropoulos Moise, 2024. "Regulatory capital requirements, inflation targeting, and equilibrium determinacy," Working Papers of BETA 2024-05, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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