Bank survival in Central and Eastern Europe

Evžen Kočenda and Ichiro Iwasaki

International Review of Economics & Finance, 2020, vol. 69, issue C, 860-878

Abstract: We analyze factors linked to bank survival on large dataset covering 17 CEE markets during the period of 2007–2015 by estimating the Cox proportional hazards model. We group banks across countries and according to their financial soundness. The overall financial development improves survival probabilities and its impact exhibits decreasing marginal returns as it is strongest in countries with lower level of financial development and banking reforms and in banks with low level of solvency. Measures of ownership structure, legal form, and corporate governance are the key economically significant factors that exhibit strongest economic effect on bank survival. Financial performance indicators predict bank survival rate with intuitively expected positive impact but their effect, in terms of economic significance, is smaller in comparison to other factors as well as the impact found in developed markets. Effect of above factors is most pronounced for banks with low financial soundness in term of their solvency. Results also appear to indicate that it makes exit more likely during the global financial crisis, shortly afterwards, and during the initial stage of the European sovereign debt crisis. This result is critical for central banks due to their regulatory and governance mandate. The results are robust with respect to size, age, and alternative assumptions on survival distribution.

Keywords: Bank survival; Banking reform; Central banks; Central and Eastern Europe; Emerging markets; Survival and exit determinants; Hazards model (search for similar items in EconPapers)
JEL-codes: C14 D02 D22 G33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Bank Survival in Central and Eastern Europe (2020)
Working Paper: Bank Survival in Central and Eastern Europe (2019)
Working Paper: Bank Survival in European Emerging Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:69:y:2020:i:c:p:860-878

DOI: 10.1016/j.iref.2020.06.020

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