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The Impact of International Financial Crisis on Bank Performance in Eastern and Central European Countries

Alin-Marius Andrie? (), Bogdan Capraru (), Florentina Ie?an-Muntean () and Iulian Ihnatov ()
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Alin-Marius Andrie?: Alexandru Ioan Cuza University of Iasi
Florentina Ie?an-Muntean: Alexandru Ioan Cuza University of Iasi
Iulian Ihnatov: Alexandru Ioan Cuza University of Iasi

EuroEconomica, 2016, issue 1(35), 111-126

Abstract: In this paper we investigate the determinants of bank profitability in 10 countries from Central and Eastern Europe, in the period between 2004 and 2013. We proxy the profitability of banks with more commonly used ratio: the return on assets (ROA), computed as a ratio of the net profit to the total bank assets. We used multiple regression with bank specific variables, banking industry variables and macroeconomic variables. Moreover, we added a global financial crisis dummy to highlight the crisis impact on asset return. OLS is the main estimation method, but we also used difference-in-difference in order to test if the crisis impact was amplified or diminished by the bank specific characteristics. The evidence shows significant differences between the profit levels of the CEEC banks. Our results are in line with the empirical literature. The impact of the international financial crisis on ROA was negative and statistically significant, as expected. The second part of the analysis we separate the banks sample in three categories: banks with high capital adequacy, large banks by total assets and foreign-owned banks. Our findings show that the three selected variables both amplified and decreased the crisis effect.

Keywords: international financial crisis; bank performance; banking industry variables; macroeconomic variables (search for similar items in EconPapers)
Date: 2016
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