 Integrating bank profit and risk-avoidance decisions for selected European countries: A micro–macro analysisJames P. Gander Economic Modelling, 2013, vol. 31, issue C, 717-722 Abstract: A two-equation integrated model is developed to capture bank profit and risk-avoidance decisions. Output is limited to customer loans. The profit function is based on output and selected inputs. Risk-avoidance (using the capitalization ratio) depends on micro and micro∗macro interactive variables. The SUR method is used to test the hypothesis that the two functions are interdependent. Also, a single reduced-form equation is derived from the SUR model to analyze the volatility of the capitalization ratio. Five European countries and their banks for the period 1991–2001 are used to run the regressions and to test the hypothesis. The individual statistical results were generally consistent with similar results found in the literature. The Breusch–Pagan test of independence was rejected. A key finding from the volatility analysis suggests that bank profit rates are inversely related to the volatility of the banks' capitalization ratios as measured by their variances. Keywords: Bank behavior; Profit; Capital ratios; Volatility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:31:y:2013:i:c:p:717-722 DOI: 10.1016/j.econmod.2013.01.014 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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