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Impact of the Subprime Crisis on Commercial Banks’ Financial Performance

Hao Fang (), Yang-Cheng Lu () and Chi-Wei Su ()
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Hao Fang: Department of Assets and Property Management, Hwa Hsia Institute of Technology, Taiwan
Yang-Cheng Lu: Department of Finance, Ming Chuan University, Taiwan
Chi-Wei Su: Department of Finance, Ocean University of China, Qingdao, Shandong, China

Panoeconomicus, 2013, vol. 60, issue 5, 593-614

Abstract: We investigated changes in the financial performance of representatives of the world’s top 200 commercial banks after the global subprime financial crisis. Our empirical results show that following the subprime-crisis disclosure, all commercial banks exhibited worse performance in asset quality, profitability, liquidity, and growth index, accompanied by risk increases in asset adequacy, managerial ability, profitability, and growth index. Developed markets have suffered a greater negative influence than emerging markets, causing downward pressure on asset adequacy, asset quality, and profitability since the subprime crisis. Commercial banks within developed nations suffered more direct pronounced effects from the subprime crisis than did those in emerging markets. Our results prove that larger commercial banks, particularly those with larger capitalization, have the economies-of-scale advantage to resist the negative effects of economic downturns.

Keywords: Subprime crisis; Financial performance; Commercial banks; CAMELS; Capitalization distribution (search for similar items in EconPapers)
JEL-codes: C23 G21 E02 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:voj:journl:v:60:y:2013:i:5:p:593-614