THE RISK AND THE BANKING ACTIVITY IN PORTUGAL – A PANEL DATA APPROACH

Jose Ramos Manso, Joao Monteiro () and Sara Ferreira ()
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Joao Monteiro: Universidade Beira Interior, Covilha, Portugal
Sara Ferreira: Universidade Beira Interior, Covilha, Portugal

European Journal of Accounting, Finance & Business, 2013, vol. 1, issue 2, 18-45

Abstract: This study tests the Portuguese banking performance, studying which are the exposition risks of the banks and their financial robustness to shocks like the ones they have been exposed recently. The article uses data from the period 2005-2009. The idea was to capture the effects of the international liquidity crises triggered by the end of 2008 that Portugal felt very seriously. In order to do this we used a panel of 36 banks installed in Portugal at that time with data collected from the entire bank sample. The main contributions of this article are related to the utilization of panel data analysis – fixed and random effects – applied to a sample of all the banks operating in Portugal with the exceptions of the mutual banks like Montepio Geral and the agricultural local banks (that have special characteristics) and use it to identify the explicative factors of the performance of the Portuguese banks. In methodological terms, the article uses two panel data – a balanced and an unbalanced one – either with fixed or with random effects. The idea is to analyze the sustainability of the Portuguese banks that cross an enormous international finance turbulence since 2008. The analyze took us to the conclusion, that among other elements, that there are bank that have a bigger exposition than others, that it is possible to identify which are the factors that are positively or negatively related to the performance or sustainability of the banking system of this EU country. The results also show that the best panel data model to study the banking performance is the fixed effect one, that the determination coefficient is very high (R2=99,9%) and highly significant in statistical terms (Prob=0.00), that indicators like the credit risk, Deposits, operative Costs, Liquidity, the banking ownership (public or private), and the years 2007 and 2009, are not significant in statistical terms, but are significant factors like capital, profit, productivity, interest rates, bank size and the year 2008, that there are positive associations between the bankingperformance and the factors capital, profit, productivity and the interest rates, and a negative association between banking performance and bank size; it is also shows that these results are in accordance with the specialized literature, namely with the articles whose reference is Iannotta et al. (2007) and Athanasoglou et al. (2008), among others.

Date: 2013
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