Factors influencing the profitability of EU banks before and during the financial crisis

Akin, I ORCID: 0000-0003-0918-7441 (2016) 'Factors influencing the profitability of EU banks before and during the financial crisis.' İstanbul Gelişim Üniversitesi Sosyal Bilimler Dergis, 3 (2). pp. 151-184. ISSN 2148-4287

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Abstract

This research aims at examining the effect of credit risk on financial performance of the EU banks. Return on Asset (ROA) and Return on Equity (ROE) which are dependent variables were used as financial performance indicators. Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Loan Loss Provision (LLP) and Loan to Debt (LTD) which are independent variables were used as credit risk indicators. This study concludes that Return on Asset and Return on Equity both has been found to have significant effect on profitability. Capital Adequacy Ratio positively impacted banks’ financial performance with the exception of Non-Performing Loan and Loan Loss Provision which were found to have a negative impact on the banks’ profitability. Also, Loan to Debt generally was not significant to explain EU banks’ profitability. Shortly, EU banks profitability has been affected positively with better credit risk of these banks. Additionally, credit risk committees should take Inflation and Gross Domestic Product level into account. While Gross Domestic Product level had a negative impact on EU banks’ profitability, Inflation had a positive effect on the EU banks’ profitability.

Item Type:	Article
Note:	Journal title translates into English as 'Istanbul Gelişim University Journal of Social Sciences'.
Keywords:	credit risk, performance, panel data regression, EU banks, financial crisis
Subjects:	H Social Sciences > HG Finance
Divisions:	Bath Business School
Date Deposited:	05 Sep 2022 14:14
Last Modified:	05 Sep 2022 14:15
URI / Page ID:	https://researchspace.bathspa.ac.uk/id/eprint/14943

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