THE CAUSAL RELATIONSHIP BETWEEN BANK CAPITAL AND PROFITABILITY

David E. Hutchison and Raymond Cox
Additional contact information
David E. Hutchison: Westwood Development Group and University of Ontario, Institute of Technology, Oshawa, Canada

Annals of Financial Economics (AFE), 2007, vol. 03, issue 01, 1-11

Abstract: The relationship between capital structure and return on equity (ROE) is examined. It is shown that for banks in the US, for the relatively less regulated 1983–1989 period as well as the more highly regulated 1996–2002 period, there is a positive relationship between financial leverage and the ROE. The analysis is extended to determine the relationship between return on assets (ROA) and equity capital. The evidence supports the hypothesis that there is a positive relationship between equity capital and ROA.

Keywords: Banks; capital profitability; G21; G32 (search for similar items in EconPapers)
Date: 2007
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010495207500029
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:03:y:2007:i:01:n:s2010495207500029

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010495207500029

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().