Endogenous Capital and Profitability in Banking
ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics
This paper investigates the relation between bank capital and profitability. To my knowledge, no previous paper has analysed this problem in a two-equation structural model. Contrary to what is reported with surprising frequency in this field of research, the results show no statistically significant relationship between capital and profitability. Given non-binding capital requirements this finding is consistent with the view that, while raising capital is costly for banks, it is associated with compensating benefits that offset these additional costs. Consequently, when capital structure is endogenously determined in a profit maximising equilibrium, no systematic relation between capital and profit is expected.
Pages: 30 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2006-464
Access Statistics for this paper
More papers in ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().