Bank capital adequacy is the key driver of a resilient banking system, capable of absorbing shocks, and consequently Basel III regulation raised the quality and quantity of the regulatory capital base. But are better capitalized banks perceived as less risky by the market? In other words, how does banks’ capital base impact on the riskiness of their equity? Does the market also consider leverage, asset quality and profitability? In our work we aim to address these issues, analyzing sample of large European listed banks (those under ECB supervision) for the 2007 -2013 period. We expect to find that banks’ riskiness of equity returns is influenced by capital adequacy, and in turn by how higher capital ratios have been achieved, through profitability and retained earnings, new share issues, deleveraging (i.e. lower total assets and/or risk weighted assets).
Bank profitability and capital adequacy in the post-crisis context / Brogi, Marina; Langone, Rosaria. - STAMPA. - (2015), pp. 95-110. [10.1007/978-3-319-17413-6].
Bank profitability and capital adequacy in the post-crisis context
BROGI, Marina
;LANGONE, ROSARIA
2015
Abstract
Bank capital adequacy is the key driver of a resilient banking system, capable of absorbing shocks, and consequently Basel III regulation raised the quality and quantity of the regulatory capital base. But are better capitalized banks perceived as less risky by the market? In other words, how does banks’ capital base impact on the riskiness of their equity? Does the market also consider leverage, asset quality and profitability? In our work we aim to address these issues, analyzing sample of large European listed banks (those under ECB supervision) for the 2007 -2013 period. We expect to find that banks’ riskiness of equity returns is influenced by capital adequacy, and in turn by how higher capital ratios have been achieved, through profitability and retained earnings, new share issues, deleveraging (i.e. lower total assets and/or risk weighted assets).File | Dimensione | Formato | |
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Brogi_Bank-profitability_2016.pdf
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Brogi_Financial-Crisis_Indice_2016.pdf
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