Cross-sectional determinants of bank performance under deposit dollarization in emerging markets

Ali Kutan, Emre Ozsoz and Erick W. Rengifo

Emerging Markets Review, 2012, vol. 13, issue 4, 478-492

Abstract: Dollar-denominated deposits and loans could increase financial fragility in emerging market banking systems. This currency mismatch does not only increase banks' currency risk when the proportion of dollar-denominated loans with respect to local-denominated loans increases but also it increases their clients' default risk if depreciation occurs. This paper investigates the profitability of 36 dollarized banking systems. Results suggest that after controlling for some macroeconomic and institutional variables, dollarization, as the currency mismatch hypothesis suggests, depresses bank performance and lowers bank profitability. Results also show that the effect of institutions more than offsets the negative impact of dollarization on banks' profitability.

Keywords: Dollarization; Bank performance; Bank profitability (search for similar items in EconPapers)
JEL-codes: F31 G21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014112000465
Full text for ScienceDirect subscribers only

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:eee:ememar:v:13:y:2012:i:4:p:478-492

DOI: 10.1016/j.ememar.2012.07.003

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().