Bank leverage and profitability: Evidence from a sample of international banks
Andrea Beltratti and
Giovanna Paladino ()
Review of Financial Economics, 2015, vol. 27, issue C, 46-57
We examine the relationship between leverage and residual income for a sample of international banks using an unbalanced panel over the period 2005–2011. Our GMM-based econometric model considers both bank-level and country-level variables to control for several other factors aside from equity capital and allows for endogeneity and unobservable heterogeneity. We document a significant positive non-monotonic link between the capital ratio and residual income for the international banking industry. These results are robust to a number of different model specifications.
Keywords: Implied cost of capital; Residual income capital structure; Dynamic system GMM; Banking industry (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:27:y:2015:i:c:p:46-57
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