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A Multi-Country Analysis of Bank Capital and Earnings

Author

Listed:
  • James R. Barth

    (Auburn University, Auburn, AL 36849, USA)

  • Daniel M. Gropper

    (Auburn University, Auburn, AL 36849, USA)

  • John S. Jahera

    (Auburn University, Auburn, AL 36849, USA)

Abstract

The purpose of this paper is to analyze the relationship between bank capital and earnings. However, because banks and other financial service firms are increasingly operating in a global marketplace, it is important to examine bank relationships beyond the borders of a single country. This paper, therefore, analyzes the relationship between bank capital and earnings employing a sample of 231 banks in ten Pacific basin countries and the United States. More specifically, following the lead of earlier research, the study examines the relationship between the capital-to-asset ratio and return-on-equity. The empirical results indicate that, contrary to the case of U.S. banks during the 1980s, a significant negative relationship exists between these two variables for the sample banks in the eleven countries in 1994. This relationship generally holds when various control variables, including both firm- and country-specific variables, are included.

Suggested Citation

  • James R. Barth & Daniel M. Gropper & John S. Jahera, 1998. "A Multi-Country Analysis of Bank Capital and Earnings," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 123-155.
    • Handle: RePEc:wsi:rpbfmp:v:01:y:1998:i:02:n:s0219091598000120
    DOI: 10.1142/S0219091598000120
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    Cited by:

    1. Paroush, Jacob & Schreiber, Ben Z., 2019. "Profitability, capital, and risk in US commercial and savings banks: Re-examination of estimation methods," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 148-162.
    2. Faisal Abbas & Shoaib Ali, 2022. "Is Economic Freedom a Moderator of the Relationship Between Bank Capital and Profitability?," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(2), pages 273-292, June.
    3. Bryan Stanhouse & Duane Stock, 2016. "Credit line takedown and endogenous bank capital," Review of Quantitative Finance and Accounting, Springer, vol. 46(4), pages 691-723, May.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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