Convergence and clustering of Tier 1 capital in the European banking sector: a non-linear factor approach

Nicholas Apergis (), Alexandros Gabrielsen, James Payne and Paolo Zagaglia

International Journal of Monetary Economics and Finance, 2012, vol. 5, issue 2, 210-221

Abstract: This short communication examines the convergence of the Tier 1 capital ratio in the banking sector across the EMU. The study applies the Phillips-Sul convergence and clustering algorithm for 251 European banks over annual periods from 1990 to 2010. The null hypothesis of full convergence is rejected; however, the convergence tests reveal heterogeneity in the Tier 1 capital ratio in the European banking sector, with five distinct clusters.

Keywords: Tier 1 capital ratio; Phillips-Sul club convergence method; Europe; banking sector; EMU; Economic and Monetary Union; European Union; clustering algorithms; European banks; equity capital; risk-weighted assets. (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:5:y:2012:i:2:p:210-221

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