Bank Profitability and Efficiency in Portugal and Spain: A Non-Linearity Approach

Maria Elisabete Neves, Catarina Proença and António Dias
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Maria Elisabete Neves: Coimbra Business School ISCAC, Polytechnic Institute of Coimbra, Quinta Agrícola–Bencanta, 3045-231 Coimbra, Portugal
Catarina Proença: Coimbra Business School ISCAC, Polytechnic Institute of Coimbra, Quinta Agrícola–Bencanta, 3045-231 Coimbra, Portugal
António Dias: CETRAD–DESG, University of Trás-os-Montes and Alto Douro, Quinta de Prados, 5000-801 Vila Real, Portugal

JRFM, 2020, vol. 13, issue 11, 1-19

Abstract: This paper aims to analyze the determinants of profitability and bank efficiency in the Iberian Peninsula. To achieve the proposed objective, a sample of 66 Portuguese and Spanish banks was analyzed. To test the hypotheses formulated according to the proposed literature review, the panel data methodology was used; specifically, the Generalized Method of Moments (GMM) system model proposed by and the Tobit model. The results point out that the banking performance, measured in terms of profitability and efficiency, in the Iberian Peninsula, is influenced by internal management variables, but also by the macroeconomic environment. More interestingly, and new in the Iberian banking sector literature, the results prove a positive and negative non-linear relationship between bank size and their levels of profitability and efficiency, respectively.

Keywords: performance determinants; bank size; Iberian Peninsula; GMM system; DEA (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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