Have More Profitable Banks a More or a Less Risky Lending Policy? Empirical Evidence from CEE Countries

Blanka Skrabic Peric

Prague Economic Papers, 2018, vol. 2018, issue 5, 573-587

Abstract: This paper investigates the short and long-run relationship between credit risk and two bank profitability indicators ROA and ROE in Central and Eastern European countries during the period from 2000 to 2010. Results from previous research mostly confirm the negative relationship between profitability and credit risk by considering the current or one year lagged value of profitability. Certain crisis indicates that more profitable banks before the crisis became more risky during the time of crisis. These results motivate us to upgrade the model of credit risk by including earlier values of profitability. Results indicate that two or three years are necessary for growth of profitability to increase credit risk. However, the long-run relationship between foreign banks' profitability and credit risk is positive, for both indicators. For the domestic bank, the long-run effect of ROA on credit risk is positive, while for ROE this relationship is negative.

Keywords: credit risk; profitability; foreign bank; CEE countries (search for similar items in EconPapers)
JEL-codes: C23 G21 G32 P34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://pep.vse.cz/doi/10.18267/j.pep.666.html (text/html)
http://pep.vse.cz/doi/10.18267/j.pep.666.pdf (application/pdf)
free of charge

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:prg:jnlpep:v:2018:y:2018:i:5:id:666:p:573-587

Ordering information: This journal article can be ordered from
Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
http://pep.vse.cz

DOI: 10.18267/j.pep.666

Access Statistics for this article

Prague Economic Papers is currently edited by Klára Pavlová

More articles in Prague Economic Papers from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().